RARY 
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ALEXANDER    HAMILTON 


ALEXANDER  HAMILTON 
From  a  painting  by  John  Trumbull 


ALEXANDER  HAMILTON 

AN  ESSAY 


BY 

WILLIAM   S.    CULBERTSON,   PH.  D. 


This  essay  won  the  John  A.  Porter  Prize, 
Yale  University,  1910 


NEW  HAVEN:  YALE  UNIVERSITY  PRESS 

LONDON:   HENRY   FROWDE 

OXFORD  UNIVERSITY  PRESS 

MCMXI 


COPYRIGHT,  1911, 

BY 
THE  KINGSLEY  TRUST  ASSOCIATION 


TO 
MY    FATHER    AND    MOTHER 


TERMS  OF  FOUNDATION  OF  THE  JOHN 
A.  PORTER  UNIVERSITY  PRIZE 

(As  Originally  Established  in  1872) 

At  a  meeting  of  the  President  and  Fellows  of 
Yale  College,  held  in  New  Haven,  March  13, 
1872,  an  offer  was  received  from  the  Kingsley 
Trust  Association,  dated  at  New  Haven,  Decem- 
ber 15,  1871,  placing  at  the  disposal  of  the  Cor- 
poration of  Yale  College,  annually,  the  sum  of  two 
hundred  and  fifty  dollars,  to  constitute  a  prize  to 
be  called  the  John  A.  Porter  Prize,  and  to  be 
awarded  for  an  English  essay,  upon  the  following 
conditions,  viz. : 

"i.  The  prize  may  be  competed  for  by  any 
member  of  any  department  of  the  College,  pursu- 
ing a  regular  course  for  a  degree,  who  shall  have 
been  a  member  for  at  least  one  academic  year  prior 
to  the  time  when  the  prize  shall  be  awarded. 

"2.  The  prize  shall  be  awarded  by  three 
judges,  two  to  be  appointed  by  the  President  of  the 
College,  and  one  by  the  Trustees  of  the  Kingsley 
Trust  Association;  such  judges  to  be  chosen  or 
appointed  on  or  before  the  first  day  of  the  second 
academic  term.  The  award  of  the  prize  shall  be 
announced  on  Commencement  Day. 

[vii] 


TERMS  OF  FOUNDATION 


"3.  Subjects  shall  be  chosen,  and  the  length 
and  character  of  the  essays  may  be  specified  by  the 
Trustees  of  the  Kingsley  Trust  Association.  The 
subjects  shall  be  publicly  announced  on  or  before 
the  first  day  of  the  second  academic  term  of  the 
present  collegiate  year,  and  hereafter  within  the 
first  two  weeks  of  the  first  academic  term. 

"4.  If  in  any  year,  in  the  opinion  of  the  judges, 
none  of  the  competing  essays  be  of  sufficient  excel- 
lence, the  prize  shall  not  be  awarded. 

"5.  Competing  essays  shall  be  transmitted  to 
the  judges  within  one  week  after  the  opening  of  the 
third  academic  term,  under  cover,  signed  by  a 
fictitious  name,  and  accompanied  by  the  real  name 
of  the  writer  in  a  sealed  enclosure. 

"6.  The  Trustees  reserve  the  right  to  retain 
all  competing  manuscripts,  and  the  right  of  publi- 
cation of  the  same;  each  essay  must,  therefore,  be 
accompanied  by  an  assignment  of  the  right  of  copy- 
right. 

"7.  These  terms  and  conditions  may  at  any 
time  be  altered  by  the  Trustees  of  the  Kingsley 
Trust  Association,  with  the  consent  of  the  Presi- 
dent and  Fellows  of  the  College." 

Resolved,  That  the  foregoing  offer  be  accepted 
upon  the  above-named  conditions. 

Attest, 

FRANKLIN  B.  DEXTER,  Secretary. 

[  viii  ] 


THE  JOHN  ADDISON  PORTER  PRIZE  IN 
YALE  UNIVERSITY 

The  John  Addison  Porter  Prize  consists  of  the 
income  of  a  fund  of  $10,000,  given  by  the  Kings- 
ley  Trust  Association,  the  corporate  name  of  the 
Scroll  and  Key  Society  of  Yale  College.  It  was 
established  in  1872,  and  named  in  honor  of  Pro- 
fessor John  Addison  Porter  of  the  Class  of  1842, 
one  of  the  founders  of  the  Association.  The 
original  endowment  was  in  the  amount  of  $5000, 
but,  in  1909,  the  endowment  was  doubled  and  the 
prize  is  now  $450. 

The  prize  was  originally  given  for  an  English 
essay  on  one  of  a  given  list  of  subjects.  With  the 
increase  of  the  endowment  the  conditions  of  the 
competition  were  changed  and  are  now  as  follows : 

"i.  The  prize  is  offered  for  a  work  of  scholar- 
ship in  any  field  where  it  is  possible,  through  origi- 
nal effort,  to  gather  and  relate  facts  or  principles, 
or  both,  and  to  present  the  results  in  such  a  liter- 
ary form  as  to  make  the  product  of  general  human 
interest. 

U2.  No  list  of  subjects  for  essays  in  competi- 
tion for  the  prize  is  prescribed. 

"3.  Competition  for  the  prize  is  open  to  all 
resident  students  in  the  University  who  are  candi- 
dates for  a  degree. 

[ix] 


JOHN  ADDISON  PORTER  PRIZE 

"4.  No  essay  will  be  excluded  because  it  has 
already  received  some  other  award. 

"5.  No  essay  will  be  excluded  because  it  has 
already  received  credit  in  course. 

"6.  No  essay  will  be  considered  for  this  prize 
unless  it  be  specially  submitted  for  that  purpose. 

"7.  Essays  may  be  submitted  anonymously  or 
not,  at  the  option  of  the  writer. 

"8.  All  essays  competing  for  the  prize  must  be 
sent  addressed  to  the  John  Addison  Porter  Prize 
Committee,  in  care  of  the  Secretary  of  Yale  Uni- 
versity, New  Haven,  Conn.,  before  April  i,  of 
each  year. 

"9.  If  none  of  the  competing  essays  is  deemed 
of  sufficient  merit,  the  prize  will  not  be  awarded. 

uio.  The  Association  may,  at  its  pleasure, 
print  the  winning  essay.  In  this  case  a  surrender 
of  copyright  by  the  author  will  be  required. 

"i  i.  If  the  winning  essay  is  not  printed  by  the 
Association  the  author  may  make  arrangements  to 
publish  the  prize-winning  essay.  In  this  case  the 
line  "This  essay  won  the  John  A.  Porter  Prize, 
Yale  University"  (with  the  year)  shall  appear  on 
the  title  page  of  the  printed  essay. 

"12.  The  winner  of  the  prize  will  be  under  no 
obligation  to  print  the  prize-winning  essay." 

Inquiries  regarding  the  prize  can  be  addressed 
to  the  Committee  on  the  John  A.  Porter  Prize, 
care  of  the  Secretary  of  Yale  University. 


PREFACE 

This  essay  was  awarded  the  John  Addison 
Porter  Prize  of  Yale  University  in  1910.  I  have 
made  some  changes  in  the  manuscript  as  it  was 
originally  submitted.  I  have,  in  some  cases, 
altered  the  form  of  statement;  in  others,  cut  out 
passages  which  seemed  unnecessary.  In  chapters 
seven,  eight  and  nine  I  have  added  certain  unpub- 
lished material  which,  since  the  prize  was 
awarded,  I  have  found  among  Hamilton's  papers 
in  the  Library  of  Congress.  But  these  changes 
and  additions  have  all  been  in  accord  with  the 
outline  and  conclusions  of  the  original  manu- 
script and  the  essay  as  now  published  is  sub- 
stantially as  it  won  the  prize. 

The  material  here  published  for  the  first  time 
relates  to  manufactures.  No  attempt  has  been 
made  to  publish  anything  except  a  few  passages 
which  throw  light  on  the  problem  of  this  essay. 
I  refer  to  the  unpublished  preliminary  drafts  of 
the  Report  on  Manufactures  as  "MS.  Manufac- 
tures, i,  2,  and  3."  The  unpublished  letters  which 
I  have  used  are  referred  to  by  the  volume  and 
page  in  Hamilton's  papers  in  the  Library  of  Con- 
gress. I  have  used  the  Federal  Edition  of  his 
works  and  it  is  referred  to  throughout  the  essay 
as  "Works." 

[xi] 


PREFACE 


This  essay  is  published  by  the  Kingsley  Trust 
Association  (the  corporate  name  of  "Scroll  and 
Key"  Society  of  Yale  College),  by  whom  this 
prize  was  founded.  For  assistance  in  writing  the 
essay  I  am  chiefly  indebted  to  Prof.  Henry  C. 
Emery  of  Yale  University.  Under  his  influence 
I  became  interested  in  the  study  of  Hamilton  as 
a  thinker,  and  his  suggestions  and  criticisms  have 
assisted  me  materially  in  my  endeavor  to  interpret 
the  writings  of  Hamilton  in  the  light  of  the  move- 
ments of  thought  in  the  nineteenth  century.  Since 
it  is  impossible  in  almost  all  cases  to  separate  his 
ideas  from  my  own,  it  is  altogether  fitting  that  I 
should  recognize  here  his  influence  upon  my  think- 
ing which  has  been  no  less  deep  than  his  friend- 
ship has  been  kind. 

w.  s.  c. 

Yale  University,  June,  1911. 


[xii] 


CONTENTS 


Page 

Chapter   i.     Introduction I 

Chapter  2.     Nationalism 4 

Chapter  3.     The  Problem       ....  17 

Chapter  4.     National   Defence   and  Neu- 
trality    36 

Chapter  5.     Authority 49 

Chapter  6.     Finance  and  Unity      ...  64 

Chapter  7.     Dangers     of     Homogeneous 

Expansion         ....  86 

Chapter  8.     Manufactures       ....  112 

Chapter  9.     Protection 127 


[xiii] 


CHAPTER  FIRST 

INTRODUCTION 

The  facts  of  the  life  of  Alexander  Hamilton 
are  so  familiar  that  a  mere  catalogue  of  them  will 
serve  to  refresh  the  mind  of  the  reader.  He  was 
born  January  n,  1757,  on  the  little  island  of 
Nevis,  one  of  the  Leeward  group  southeast  from 
Porto  Rico.  His  father  was  a  Scotch  merchant 
and  his  mother  was  of  Huguenot  descent.  At  the 
age  of  twelve  he  became  a  clerk  in  Cruger's  store 
at  St.  Croix.  Three  years  later,  assisted  by  his 
relatives,  he  came  to  New  York  and  in  the  fall  of 
1773  entered  what  is  now  Columbia  University. 
On  the  outbreak  of  the  Revolution  he  quit  the 
classroom  for  the  field  and  in  1777,  at  the  age  of 
twenty,  we  find  him  military  secretary  to  Washing- 
ton. In  1780,  he  found  time  to  marry  Miss  Betsy 
Schuyler;  in  1781,  after  resigning  from  Washing- 
ton's official  family,  he  distinguished  himself  by 
capturing  the  first  redoubt  at  Yorktown.  During 
the  next  year  he  was  called  to  the  bar.  In  1786, 
he  represented  New  York  in  the  Philadelphia 
Convention  and  in  1789,  Washington  called  him 
to  be  Secretary  of  the  Treasury — an  office  which 
he  held  a  little  over  five  years.  He  returned  then 
to  the  practice  of  the  law,  in  order  to  support  his 

[i] 


ALEXANDER  HAMILTON 


large  family;  but  he  continued,  until  he  was  shot 
by  Burr  on  July  n,  1804,  to  take  an  active  inter- 
est in  public  affairs. 

Hamilton  was  a  contemporary  with  Frederick 
the  Great,  the  Pitts,  Fox,  Burke,  Adam  Smith, 
Washington,  Turgot,  and  Napoleon.  He  was 
born  during  the  Seven  Years  War,  which  in 
Europe  raised  Prussia  to  a  place  of  first  rank 
among  the  powers  and  which  in  India  and 
America  established  the  British  Empire  on  the 
ruins  of  French  ambition.  He  died  two  months 
after  the  victor  of  Marengo  was  crowned  heredi- 
tary emperor  of  the  French.  He  saw  the  French 
Revolution  begin  in  bloodshed  and  terror;  he  saw 
it  end  in  despotism.  Above  all,  he  saw  and  helped 
achieve,  first,  American  independence,  and  then 
American  unity. 

Many  views  have  been  expressed  about  Hamil- 
ton and  his  work.  Some  writers  have  seen  in  him 
a  paragon  of  wisdom  and  virtue;  they  are  blind  to 
his  faults  and  to  the  merits  of  his  opponents. 
Others  have  condemned  him  as  a  Tory  and  reac- 
tionary in  politics  and  as  a  defender  of  the 
fallacies  of  mercantilism  in  economics.  Still 
others  have  seen  in  him  a  champion  of  the  capital- 
istic class  with  no  thought  or  sympathy  for  the 
proletarian  masses.  These  writers  have  made 
illuminating  studies  of  Hamilton  and  his  work, 
but  they  seem  to  fail  to  grasp  the  significance  of 

[2] 


INTRODUCTION 


the  idea   of  nationality  which  dominated   every 
phase  of  his  political  and  economic  thinking. 

The  object  of  this  essay  is  to  avoid  writing 
either  biography  or  history.  Valuable  works 
already  exist  on  the  life  of  Hamilton  and  on  the 
history  of  his  times.  This  essay  is  addressed  to 
those  who  are  interested  in  knowing  the  relation 
of  Hamilton  to  one  of  the  great  historic  move- 
ments of  thought  of  the  nineteenth  century.  Its 
object  is  to  state,  first,  the  general  principles  of 
nationalism  and  their  relation  to  other  theories 
of  society  and,  secondly,  to  show  from  Hamilton's 
writings  how,  in  each  problem  of  practical  states- 
manship which  confronted  him,  these  were  the 
principles  which  influenced  and  determined  his 
action.  The  purpose  of  this  essay  is  not  to  deter- 
mine whether  the  ideas  of  Hamilton  were  right 
or  wrong;  it  is  to  state,  sympathetically,  his  theory 
of  society  and  to  formulate  a  philosophic  basis  for 
his  public  acts  and  writings. 


[3] 


CHAPTER  SECOND 

NATIONALISM 

There  are  according  to  Emery  three  economic 
theories  of  society:  "the  classical  theory  of  com- 
peting individuals;  the  socialistic  theory  of  com- 
peting classes;  and  the  protectionist  theory  of 
competing  nations."4  The  classical  theory  is  the 
individualism  of  Adam  Smith.  This  astute  Scotch- 
man believed  that  if  every  man,  as  long  as  he  does 
not  violate  the  laws  of  justice,  is  left  perfectly  free 
to  pursue  his  own  interest  in  his  own  way,  and  to 
bring  both  his  industry  and  capital  into  competi- 
tion with  those  of  every  other  man,  the  obvious 
and  simple  system  of  natural  liberty  will  establish 
itself  of  its  own  accord.b  He  regarded  the  inter- 
est of  the  individual  and  society  as  identical  since, 
as  he  put  it,  the  individual  by  the  study  of  his  own 
advantages  naturally,  or  rather  necessarily,  is  led 
to  prefer  that  employment  which  is  most  advan- 
tageous to  society.0  It  was  the  height  of  pre- 
sumption, he  thought,  to  endeavor  to  regulate  the 
employment  of  labor  and  capital,  for  from  the 
nature  of  the  case,  any  such  regulation  was  sure 

a  Emery,  H.  C.,  The  New  Protectionism.  Yale  Alumni 
Weekly,  vol.  13,  p.  51. 

b  Smith,  A.,  Wealth  of  Nations  (1776)  (Cannan  edition), 
Book  4,  ch.  9,  vol.  2,  p.  184. 

c  Ibid.,  Book  4,  ch.  2,  vol.  1,  p.  419. 

[4] 


NATIONALISM 


to  divert  labor  and  capital  from  the  more  to  the 
less  productive  enterprises. 

As  a  protest  against  certain  excesses  of  regula- 
tion and  against  economic  fallacies  which  existed 
in  the  public  mind  in  1776,  Adam  Smith's  doc- 
trine of  individual  freedom  was  valuable;  but 
before  the  nineteenth  century  was  half  gone  the 
weaknesses  of  free  competition  had  begun  to  show 
themselves. 

Against  this  individualistic  theory  of  society 
must  be  set,  as  shown  above  in  the  quotation  from 
Emery,  the  two  opposing  theories  which  came  as 
reactions  to  it.  The  first  reaction  is  found  in  the 
socialism  of  Karl  Marx  and  Ferdinand  Lassalle. 
To  these  men  the  interest  of  society  requires  that 
the  interest  of  the  individual  be  made  subservient 
to  the  interest  of  his  particular  class.  Marx  re- 
garded all  history  as  the  history  of  class-struggle ; 
the  lower  or  exploited  class  succeeding  from  time 
to  time  in  overthrowing  the  ruling  class  and  estab- 
lishing in  the  place  of  the  old  civilization  a  civiliza- 
tion after  its  own  image.*  Lassalle  held  that  the 
influence  of  a  class  in  a  community  depends  upon 
the  relative  amount  of  power  that  it  possesses  and 
that,  as  it  increases  in  power,  the  real  constitution 
of  the  country  reflects  its  rule.b  These  men 
believed  that  the  individual,  and  in  their  day  the 

aMarx,  K.,  Communist  Manifesto  (1848). 

b  Lassalle,  F.,  Ueber  Verfassungswesen  (1862). 

[5] 


ALEXANDER  HAMILTON 


laborer  in  particular,  who  was  being  exploited 
under  the  regime  of  free  competition,  could  find 
his  only  salvation  in  furthering  class  solidarity. 
The  most  powerful  motive  impelling  men  to 
action,  they  held,  was  not  selfish  desires,  but 
loyalty  to  class  and  to  the  interests  of  class. 

The  second  great  reaction  against  the  doctrine 
of  Adam  Smith  is  nationalism.  In  this  philoso- 
phy, which  is  the  modern  child  of  the  old  mercan- 
tile doctrine  of  Cromwell,  Colbert,  and  Frederick 
the  Great,  there  are  two  fundamental  conceptions : 
"first,  that  the  welfare  of  the  nation  is  not  the 
same  thing  as  the  welfare  of  the  individuals  which 
constitute  it,  and  therefore,  it  is  the  duty  of  the 
statesman  to  adopt  a  positive  policy  which  will 
secure  the  welfare  of  the  nation;  second,  that  the 
interests  of  different  nations  are  not  harmonious 
but  antagonistic."* 

In  this  essay  we  will  study  Hamilton's  relations 
to  these  three  movements  of  thought.  Although 
Marx  did  not  formulate  the  socialist  theory  until 
almost  a  half  century  after  Hamilton's  death, 
modern  writers  have  endeavored  to  interpret 
Hamilton  in  the  light  of  it.  As  will  appear  later, 
however,  there  were  then  no  classes  in  the  social- 
istic sense  in  America  and,  if  there  had  been, 
Hamilton  would  have  regarded  any  philosophy 

a  Emery,    H.     C.,     The    New    Protectionism,     Yale    Alumni 
Weekly,  vol.  13,  p.  51. 

[6] 


NATIONALISM 


with  suspicion  that  put  their  interests  above  the 
interests  of  the  nation.  Hamilton's  relation  to 
the  doctrine  of  individual  freedom  was  far  more 
close.  Individualism  was  the  popular  creed  of  his 
time;  in  politics  it  appeared  in  the  Declaration  of 
Independence  and  the  ideas  of  the  French  Revolu- 
tion; in  economics  it  appeared  in  the  "Wealth  of 
Nations."  We  will  endeavor  to  show  that  Hamil- 
ton, on  the  one  hand,  opposed  this  philosophy,  and 
on  the  other,  formulated  anew  the  nationalistic 
interpretation  of  history. 

We  will  find  it  helpful,  before  proceeding  to  a 
study  of  Hamilton's  writings,  to  enlarge  on  the 
idea  of  nationalism  as  it  has  been  understood  both 
before  and  since  Hamilton's  day.  The  nationalist 
denies  that  the  interests  of  nations  are  comple- 
mentary. He  holds  that  very  often  their  interests 
may  be  antagonistic,  because  of  differences  in  race; 
devotion  to  language,  institutions  and  traditions; 
the  rivalry  of  civilizations ;  and  national  competi- 
tion for  trade  routes  and  markets.  To  him,  in  the 
words  of  List,  "a  nation  is  the  medium  between 
individuals  and  mankind,  a  separate  society  of  in- 
dividuals, who,  possessing  common  government, 
common  laws,  rights,  institutions,  interests,  com- 
mon history,  and  glory,  common  defence  and 
security  of  their  rights,  riches,  and  lives,  constitute 
one  body  free  and  independent,  following  only  the 
dictates  of  its  interests,  as  regards  other  indepen- 


ALEXANDER  HAMILTON 


dent  bodies,  and  possessing  power  to  regulate  the 
interests  of  the  individuals  constituting  that  body, 
in  order  to  create  the  greatest  quantity  of  common 
welfare  in  the  interior  and  the  greatest  quantity 
of  security  as  regards  other  nations."*  The 
nationalist  believes  that  deeper  than  man's  selfish 
interest,  deeper  even  than  his  loyalty  to  his  class, 
is  his  loyalty  to  his  nation  and  to  the  national  ideas 
under  which  he  lives.  Individuals  and  classes,  he 
says,  are  led,  by  wise  statesmanship,  to  cooperate 
within  the  nation  in  order  to  make  their  group 
powerful  against  other  groups ;  and  the  welfare  of 
particular  interests  is  thereby  made  subservient  to 
the  strength  and  prosperity  of  the  whole.  If  a 
nation  because  of  its  undeveloped  economic  organi- 
zation needs  protection,  the  nationalist  thinks  that 
it  is  the  duty  of  government  by  means  of  tariffs, 
prohibitions  and  even  war,  to  equalize  conditions 
and  stimulate  the  development  of  economic  life. 

The  mercantile  doctrine,  the  ancestor  of  modern 
nationalism,  was,  some  writers  have  believed,  a 
policy  eminently  fitted  to  the  age  in  which  it 
flourished.  In  the  ages  of  Cromwell,  Colbert,  and 
Frederick  the  Great,  political  power  was  used  to 
make  the  economic  organization  effective  against 
other  nations  and  these  statesmen  did  not  hesitate 
to  use  legislation  and  force  to  establish  the  su- 

aList,  F.,  Outlines  of  American  Political   Economy    (1827), 
Letter  2. 

[8] 


NATIONALISM 


premacy  of  their  groups.  "For  it  was  precisely 
those  governments,"  Schmoller  goes  so  far  as  to 
say,  "which  understood  how  to  put  the  might  of 
their  fleets  and  admiralties,  the  apparatus  of 
customs  laws  and  navigation  laws,  with  rapidity, 
boldness,  and  clear  purpose,  at  the  service  of  the 
economic  interests  of  the  nation  and  state,  which 
obtained  thereby  the  lead  in  the  struggle  and  in 
riches  and  industrial  prosperity."* 

The  age  of  mercantilism  was  an  age  in  which 
the  interests  of  the  leading  nations  were  antagon- 
istic; it  was  an  age  of  struggle  for  trade  routes, 
for  markets,  and  for  colonies;  it  was  an  age  in 
which  that  group  won  success  whose  members  were 
most  deeply  devoted  to  the  national  cause  and 
whose  statesmen  directed,  with  great  power,  the 
force  of  government  against  rival  groups. 

It  is  interesting  to  note  that  a  feeling,  very  much 
like  the  feeling  which  inspired  the  nations  which 
rose  to  power  under  mercantilism,  has  been  a 
powerful  factor  in  modern  politics.  "Seldom  in 
history,"  Emery  wrote  in  1902,  "has  the  feeling  of 
the  unity  of  a  race,  on  the  one  hand,  and  the 
antagonism  of  diverse  races,  on  the  other,  been  so 
consciously  held,  or  played  so  important  a  role  in 
actual  politics  as  in  recent  years. "b  The  revival 

a  Schmoller,  G.,  The  Mercantile  System,  p.  72. 
b  Emery,    H.    C.,    The    New    Protectionism,     Yale    Alumni 
Weekly,  vol.  13,  p.  53. 

[9] 


ALEXANDER  HAMILTON 


of  national  rivalry,  which  began  in  the  seventies,  at 
least  seriously  checked  the  movement  for  univer- 
sal peace  which  characterized  the  fifties  and  sixties. 
The  rapid  rise  of  transportation  facilities  revived 
the  competition  for  neutral  markets ;  the  pressure 
of  population  and  national  desire  for  empire 
renewed  the  scramble  for  colonies;  protective 
tariffs,  increase  of  armaments,  and  wars  again 
emphasized  the  fact  that  national  psychology  is 
a  force  to  be  reckoned  with.  Many  believe  that 
Germany's  successful  rise  to  wealth  and  power, 
since  her  unification,  has  been  largely  due  to  the 
national  ambition,  pride,  and  enthusiasm  awak- 
ened by  the  war  with  France.  However  that  may 
be,  it  is  evident  that  along  with  the  world-wide  re- 
vival of  nationalistic  ideas,  has  gone  the  unity  of 
Germany  and  Italy;  the  partition  of  Africa  among 
land-hungry  nations;  the  defeat  of  Russia  in  its 
attempt  to  interfere  with  Japanese  ambition  in 
the  Orient;  and  the  reawakening  of  a  long  sleep- 
ing race-consciousness  in  China,  India,  Persia,  and 
Turkey. 

The  idea  that  state  or  nation  is  something  more 
than  the  sum  of  the  individuals  who  compose  it, 
has  been  denied.  Cooper  refers4  to  the  nation  as 
a  "grammatical  contrivance,"  and  Sumner  in  his 
brilliant,  individualistic  book  on  social  classes  says 
that  "as  an  abstraction,  the  State  is  to  me  only 

a  Cooper,  Th.,  Lectures  on  Political  Economy   (1826),  p.   19. 
[10] 


NATIONALISM 


All-of-us,"a  and  that  it  owes  its  citizens  nothing 
but  peace,  order,  and  the  guarantee  of  rights. 
The  All-of-us  theory  of  the  state  is  a  part  of  the 
inheritance  from  Adam  Smith;  it  is  the  extreme 
reaction  from  mercantilism.  It  has  done  valuable 
work  in  discouraging  excessive  and  meddlesome 
legislation,  and  the  schemes  of  sentimental  re- 
formers, but  it  has  entirely  missed  the  significance 
of  psychological  forces  which  lead  men  to  unite  in 
nations.  Both  past  and  present  conditions  show 
that  mankind  does  regard  the  State  as  more  than 
All-of-us,  and  its  functions  as  more  than  peace, 
order,  and  the  guarantee  of  rights.  The  nation, 
with  its  origin  in  the  traditions  of  the  past  and  with 
its  ambitions  for  the  future,  represents  to  most  of 
its  citizens  a  cause  more  fundamental  than  their 
selfish  interests  or  the  welfare  of  their  particular 
class.  It  embodies  the  racial  ideals  of  the  group, 
and  is,  at  once,  the  protected  and  the  protector  of 
its  members. 

The  nationalist  accepts  the  teaching  of  Malthus 
that  population  in  the  end  must  be  checked  by  the 
ability  of  man  to  get  food  from  the  soil.  The 
logic  of  this  law  drove  some  classical  writers  into 
pessimism,  but  the  nationalist,  hopeful  that  the  im- 
provement in  the  arts  will  keep  pace  with  the 
increase  in  numbers,  says  that,  if  it  does  not,  it  is 
the  right  and  duty  of  the  stronger  and  more  cul- 

a  Sumner,  W.  G.,  What  Social  Classes  Owe  Each  Other,  p.  9. 
[11] 


ALEXANDER  HAMILTON 


tured  civilizations  to  supplant,  by  force  of  num- 
bers, those  civilizations  unable  to  maintain  their 
prestige.  In  countries  where  the  population  is 
stationary,  the  people  are  usually  inert,  parsi- 
monious, and  indifferent  to  progress.  The  compe- 
tition of  numbers  does  not  stimulate  them  to  new 
enterprise  and  one  generation  passes  on  to  the  next 
little  more  than  it  received.  In  countries,  on  the 
contrary,  where  population  increases  rapidly  there 
is  always  the  danger  that,  outrunning  the  progress 
of  the  arts,  it  will  lead  to  over-population,  and  that 
suffering  then  will  ensue,  first  in  the  form  of  a 
lower  standard  of  living,  and  then  in  the  form  of 
famine,  disease,  and  death.  With  these  two  risks 
before  him,  the  nationalist  does  not  despair  but 
chooses  the  latter,  believing  it  to  be  a  remoter 
possibility  than  the  former  and  that  in  the 
struggle,  which  progress  toward  it  stimulates, 
those  social  systems,  national  beliefs,  economic 
systems,  scientific  theories,  forms  of  government 
and  religion,  which  are  most  adapted  to  the  needs 
of  mankind  will  survive  and  flourish. 

Conflicts  of  civilization  have  very  often  led  to 
conflicts  of  arms.  War  in  its  broadest  sense  has 
been  a  tribunal  to  which  society  submits  questions 
which  are  beyond  the  power  of  human  reason  to 
decide — questions  of  what  ideas  shall  dominate, 
what  race  shall  be  supreme,  what  nation  shall  con- 
trol the  markets  and  colonies  of  the  world.  As  the 

[12] 


NATIONALISM 


law  of  nations  develops,  the  questions  submitted  to 
arbitration  will  increase;  in  truth,  we  may  expect 
that  ultimately  all  questions  of  law  and  fact  will  be 
decided  by  an  international  tribunal.  But  many 
men  have  honest  doubts  whether  nations  will  ever 
submit  vital  differences  to  a  human  tribunal.  It  is 
not  for  us  here  to  justify  war  or  advocate  peace; 
we  can  simply  recognize  the  fact  that  men  in  the 
past  have  chosen  to  die  in  battle  for  the  cause  they 
believe  to  be  right  rather  than  to  see  their  nation 
submit  to  another  or  their  civilization  give  place 
to  another. 

"Competition  and  combination,"  Sumner  says, 
"are  two  forms  of  life  association  which  alternate 
through  the  whole  organic  and  superorganic  do- 
mains. The  neglect  of  this  fact  leads  to  many 
socialistic  fallacies,"4  and  he  might  have  added, 
for  the  same  reason,  to  many  free-trade  fallacies. 
In  the  origins  of  society,  people,  not  naturally 
sociable,  are  drawn  together  in  order  to  assist  each 
other  in  their  struggle  with  other  groups.  Lesser 
antagonism — those  between  individuals,  families, 
and  sub-groups — are  suppressed  and  the  group 
becomes  a  cooperating  unit.  It  is  this  desire  for 
protection  which  at  first  leads  men  of  like  race  and 
interests  to  cooperate.  In  time,  the  tribe  or  nation, 
as  the  case  may  be,  develops  common  interests, 
desires,  and  racial  ambitions;  and  the  force  of 

a  Sumner,  W.  G.,  Folkways,  p.  17. 
[13] 


ALEXANDER  HAMILTON 


social  desires,  emotions,  and  aims  unites  individ- 
uals in  the  interest  of  their  civilization.  Racial 
culture  becomes  an  object  to  work  for  and  defend. 
Nations  are  gradually  formed  by  the  combination 
of  smaller  political  units.  To  the  nationalist,  na- 
tional interests  take  precedence  over  every  other 
interest  within  the  state.  He  believes  that  men 
are  devoted  above  all  else  to  their  ideals,  laws,  re- 
ligion, and  institutions,  the  sum  total  of  which 
make  up  their  civilization;  he  believes  that  the 
individual  is  strong  because  of  the  power  of  the 
nation  and  that  the  nation  is  strong  because  of  the 
devotion  of  the  individual. 

Now  this  is  the  Law  of  the  Jungle — as  old  and  as  true 

as  the  sky: 
And  the  Wolf  that  shall  keep  it  may  prosper,  but  the 

Wolf  that  shall  break  it  must  die. 
As  creeper  that  girdles  the  tree-trunk  the  Law  runneth 

forward  and  back; 
For  the  strength  of  the  Pack  is  the  Wolf,  and  the  strength 

of  the  Wolf  is  the  Pack.  "a 

To  one  who  regards  the  nation  as  the  most 
important  unit  of  .society,  the  position  and  duty  of 
the  statesman  seem  very  important.  The  states- 
man to  him  is  not  that  foolish,  presumptuous,  and 
impertinent  being  which  Adam  Smith  called  "an 

a  Kipling,  R.,  The  Second  Jungle  Book. 
[14] 


NATIONALISM 


insidious  and  crafty  animal."a  The  "Divine 
Hand,"  which  in  Smith's  system  of  natural  liberty, 
was  supposed  to  direct,  in  some  mysterious  way, 
private  interest  for  the  good  of  society,  becomes, 
from  his  point  of  view,  the  will  of  the  statesman. 
He  does  not  trust  self-interest  to  work  out  social 
harmony;  he  regards  it  as  a  force  to  be  restrained 
or  encouraged  in  the  interests  of  the  nation. 
"Men  will  pursue,"  Hamilton  says,  "their  inter- 
ests. It  is  as  easy  to  change  human  nature  as  to 
oppose  the  strong  current  of  selfish  passions.  A 
wise  legislator  will  gently  divert  the  channel,  and 
direct  it,  if  possible,  to  the  public  good."b  "Our 
prevailing  passions,"  he  observes  in  another  place, 
"are  ambition  and  intere|t;  and  it  will  ever  be  the 
duty  of  a  wise  government  to  avail  itself  of  the 
passions,  in  order  to  make  them  subservient  to  the 
public  good:  for  these  ever  induce  us  to  action."0 
"Hamilton's  idea  of  statesmanship,"  Oliver  says, 
"was  the  faithful  stewardship  of  the  estate.  His 
duty  was  to  guard  the  estate,  and,  at  the  same  time, 
develop  its  resources.  He  viewed  mankind  and 
natural  riches  as  material  to  be  used,  with  the 
greatest  possible  energy  and  with  the  least  possible 
waste,  for  the  attainment  of  national  indepen- 

&  Smith,   Adam,   Wealth  of  Nations,   Book  4,   ch.   2,   vol.    1, 
p.  432. 

b  Works,  vol.  2,  p.  58,  Convention  of  New  York,  June  25,  1788. 
c  Works,  vol.  1,  p.  408,  Federal  Convention,  June  22,  1787. 

[15] 


ALEXANDER  HAMILTON 


dence,  power,  and  permanency.  A  means  to  this 
end  was  certainly  the  prosperity  of  the  people,  but 

the  end  itself  was  the  existence  of  a  nation 

Human  society  was  something  nobler  than  a  mere 
convenience,  a  nation  greater  than  the  sum  of  its 
subjects.  One  of  the  duties  of  the  state  was  the 
well-being  of  its  citizens,  but  the  duty  of  every 
citizen  was  the  well-being  of  the  state."* 

a  Oliver,  F.  S.,  Alexander  Hamilton:  An  essay  on  American 
Union,  pp.  450-52. 


[16] 


CHAPTER  THIRD 
THE  PROBLEM 

No  delusions  of  spurious  patriotism  clouded  the 
mind  of  Hamilton  in  that  moment  of  rejoicing 
when  our  national  independence  was  finally  recog- 
nized by  England.  While  our  independence  had 
been  won,  he  feared  that  it  would  not  be  wisely 
guarded  and  used.  Back  of  the  enthusiasm  of  the 
people,  he  discerned  innumerable  foes,  both  for- 
eign and  domestic,  which  threatened  the  very  exist- 
ence of  the  young  nation.  As  an  officer  under 
Washington  he  had  had  ample  opportunity  to 
observe  the  essential  weaknesses  of  the  American 
state  and  he  knew  that  the  establishment  of  our 
nationality  was  a  far  more  difficult  problem  than 
the  winning  of  it  on  the  field  of  battle.  "Peace 
made,  my  dear  friend,"  he  wrote  to  Laurens, 
August  15,  1782,  ua  new  scene  opens.  The  object 
then  will  be  to  make  our  independence  a  blessing. 
To  do  this  we  must  secure  our  Union  on  solid 
foundations — a  herculean  task, — and  to  effect 
which,  mountains  of  prejudice  must  be  leveled! 
....  We  have  fought  side  by  side  to  make  America 
free;  let  us  hand  in  hand  struggle  to  make  her 
happy."a 

a  Works,  vol.  9,  pp.  280,  281.  Laurens  was  killed  in  a  skirmish 
August  27,  and  probably  never  received  this  letter. 

[17] 


ALEXANDER  HAMILTON 


Before  the  surrender  of  Lord  Cornwallis  at 
Yorktown,  Hamilton  had  begun  the  fight  for  union 
and  efficient  government  by  publishing  the  early 
numbers  of  "The  Continentalist."a  These  papers 
began  the  movement  which  resulted  in  the  Phila- 
delphia Convention.  "There  is  something  noble 
and  magnificent,"  he  remarked  in  his  last  paper, 
"in  the  perspective  of  a  great  Federal  Republicr 
closely  linked  in  the  pursuit  of  a  common  interest, 
tranquil  and  prosperous  at  home,  respectable 
abroad;  but  there  is  something  proportionably 
diminutive  and  contemptible  in  the  prospect  of  a 
number  of  petty  states,  with  the  appearance  only 
of  union,  jarring,  jealous,  and  perverse,  without 
any  determined  direction,  fluctuating  and  unhappy 
at  home,  weak  and  insignificant  by  their  dissen- 
sions in  the  eyes  of  other  nations. "b  His  advice, 
however,  was  not  heeded.  Five  years  passed 
before  men  undertook  the  task  of  creating  a 
strong  central  government. 

The  youthful  enthusiasm  of  Hamilton  made  him 
impatient  with  those  less  visionful  men  who  could 
not  see  that  which  seemed  so  clear  to  him,  namely, 
the  need  of  a  strong  and  efficient  union  to  conserve 
and  protect  the  wealth  and  reputation  of  the 
American  nation.  Being  entirely  free  from  local 

a  Works,  vol.  1,  pp.  243-287.    Published  at  different  times  be- 
tween July  12,  1781,  and  July  4,  1782. 
b  Works,  vol.  1,  pp.  286,  287. 

[18] 


THE  PROBLEM 


prejudice,  because  of  his  foreign  birth,  he  never 
could  understand  it,  but  it  impressed  its  melan- 
choly meaning  upon  him.  To  Washington  in  1 7 83 
he  wrote:  "The  centrifugal  is  much  stronger  than 
the  centripetal  force  in  these  States, — the  seeds  of 
disunion  much  more  numerous  than  those  of 
union."8  He  saw  on  all  sides  the  evidence  of  a 
nation  without  a  national  government.  He  saw  in 
the  impotence  and  indecision  of  Congress,  the 
opportunity  for  the  party  of  disunion  and  anarchy; 
he  saw  in  local  prejudice  and  jealousy  for  State 
sovereignty,  the  enemy  of  the  continental  or 
national  view;  he  saw  in  every  State  boundary  an 
opportunity  for  the  entering  wedge  of  foreign 
influence,  by  which  we  would  become  "a  ball  in  the 
hands  of  European  powers,  bandied  against  each 
other  at  their  pleasure"  ;b  he  saw  in  the  spirit  of 
violence  and  repudiation,  set  loose  by  the  Revolu- 
tion, the  threatening  hand  of  social  disintegration. 
Honesty  was  dethroned;  debts  were  repudiated; 
taxes  refused;  treaties  broken;  commerce  and 
industry  disorganized.  To  Hamilton  in  1787,  as 
he  recalled  the  events  of  the  last  six  years,  we 
seemed  "to  have  reached  almost  the  last  stage  of 
national  humiliation."  Under  the  Confederation 
we  had  turned  our  independence  into  a  curse  and 
made  our  name  a  byword  of  scorn  in  the  councils 

&  Works,  vol.  9,  p.  327. 
b  Works,  vol.  9,  p.  327. 

[19] 


ALEXANDER  HAMILTON 


of  Europe.  "What  indication  is  there,"  he  asks, 
"of  national  disorder,  poverty,  and  insignificance 
that  could  befall  a  community  so  peculiarly  blessed 
with  natural  advantages  as  we  are,  which  does  not 
form  a  part  of  the  dark  catalogue  of  our  public 
misfortunes?"11 

The  problem  confronting  Hamilton  had  a  very 
important  economic  aspect.  Forces  were  converg- 
ing to  force  upon  the  people  a  complete  reorgani- 
zation of  their  economic  life.  The  colonial 
economy  had  been  local  and  territorial.  Each 
colony  with  its  foreign  trade  was  self-sufficient,  and 
down  to  the  Revolution  the  only  forces  which  had 
drawn  them  together,  were  the  dangers  of  Indians, 
and  of  the  French  in  Canada.  A  parallel  exists,  as 
has  been  shown,  between  the  economic  organiza- 
tion of  Colonial  America  and  Mediaeval  Europe. 
"The  important  unit  in  the  economic  organization 
of  the  United  States  at  this  period,"  Day  says, 
"was  the  rural  group  of  perhaps  a  few  hundred  in- 
habitants."15 The  town  and  the  surrounding  terri- 
tory was  a  self-sufficient  unit.  As  the  mediaeval 
peasant  had  brought  his  goods  to  the  town  market 
to  exchange  them  for  mechandise,  the  colonial 
farmer  brought  his  butter,  eggs,  and  other  farm 
produce  to  the  country  store  and  received  those 
few  articles  of  necessity  which  he  could  afford. 

a  Works,  vol.  11,  p.  112,  The  Federalist,  No.  15. 
bDay,  Clive,  History  of  Commerce,  Sec.  561. 

[20] 


THE  PROBLEM 


Poor  transportation  facilities  reduced  travel  and 
commerce  between  the  different  sections  of  the 
country  to  a  minimum.  The  colonial  roads  were 
"thick  with  dust  in  summer,  and  absolute  sloughs, 
with  mud  a  foot  or  more  deep,  during  the  thaws  of 
winter  and  spring."*  When  possible  the  water- 
ways were  used;  and  they,  as  they  had  been  in 
Mediaeval  Europe,  were  relatively  of  great  im- 
portance. But  communication  was  at  best  sluggish. 
Men  lived  and  died  in  the  community  where  they 
were  born.  Their  horizon  was  limited  and  their 
wants  few.  The  people  were  poor,  not  because 
the  country  was  unresourceful,  but  because  the 
economic  organization  was  too  simple  to  develop 
the  resources  and  because  the  enterprise  of  the 
people  was  not  stimulated.  Colonial  life  was 
simple,  local,  and  uneventful.  The  people  were 
unenergetic  and  easy-going. 

This  local  and  territorial  economy  had  served 
the  colonists  well  enough  in  its  day.  The  self- 
sufficiency  of  each  colony  made  a  close  relation 
with  its  neighbors  economically  unnecessary.  But 
with  the  agitation  that  culminated  in  the  Revo- 
lution, this  state  of  affairs  began  to  show  its  limi- 
tations; and  during  the  Revolutionary  period, 
when  practically  all  foreign  commerce  was  de- 
stroyed, the  need  of  economic,  as  well  as  political 
unity,  began  to  be  felt.  When  the  foreign  supply 

a  Day,  Clive,  History  of  Commerce,  Sec.  565. 
[21] 


ALEXANDER  HAMILTON 


of  goods  was  shut  off,  home  manufactures,  espe- 
cially in  iron  and  woolens,  sprang  up.  Commerce 
began  to  break  over  State  boundaries;  and,  after 
the  close  of  the  War,  its  encroachment  continued. 
This  rise  of  national  economy  was  fettered  by  the 
colonial  organization  which,  with  the  tenacity  of 
outworn  institutions,  tried  to  maintain  itself  by 
restrictions  on  intercolonial  trade.  The  States,  in 
their  effort  to  strengthen  themselves,  resorted  to 
tariffs,  retaliations,  and  discriminations.  New 
Jersey  was  likened  to  a  cask  tapped  at  both  ends, 
the  contents  being  drawn  off  by  her  neighbors. 
"Each  State,"  Rabbeno  says,  "acted  on  its  own 
account,  and  was  inspired  solely  by  its  own  inter- 
ests which  often  differed  from  those  of  other 
States.  The  measures  taken  in  one  State  were 
paralyzed  by  those  of  another,  or  clashed  with 
them,  so  that  instead  of  forming  an  obstacle  to 
foreign  importation,  they  hindered  the  develop- 
ment of  the  interior  commerce  of  the  whole 
nation."* 

These  contentions  over  commerce,  Hamilton 
believed,  would  be  fatal  to  the  peace  of  the  country 
unless  adequate  power  was  given  to  the  central 
government  to  deal  with  our  commercial  relations. 
"The  spirit  of  enterprise,"  he  says,  "which  char- 
acterizes the  commercial  part  of  America,  has  left 
no  occasion  of  displaying  itself  unimproved.  It  is 

a  Rabbeno,  U.,  Protezionismo  Americano,  E.  2,  ch.  1,  sec.  9. 
[22] 


THE  PROBLEM 


not  at  all  probable  that  this  unbridled  spirit  would 
pay  much  respect  to  those  regulations  of  trade  by 
which  particular  States  might  endeavor  to  secure 
exclusive  benefits  to  their  own  citizens.  The  in- 
fractions of  these  regulations,  on  the  one  side,  the 
effort  to  prevent  and  repel  them,  on  the  other, 
would  naturally  lead  to  outrages,  and  these  to  re- 
prisals and  wars."*  To  the  mind  of  Hamilton 
then,  union  was  as  necessary  from  the  economic, 
as  from  the  political,  standpoint.  The  state 
economy,  having  no  longer  its  utility  to  claim  for 
its  defence  and,  becoming,  therefore,  selfish  and 
grasping,  was  anti-national  and,  for  that  reason, 
stood  in  the  way  of  Hamilton's  plan  for  establish- 
ing a  cooperating,  independent  nation. 

The  need  for  national  control  of  commerce  was 
even  more  seriously  felt  in  our  foreign  relations. 
Prior  to  our  independence  colonial  shipping  had 
been  unified  and  protected  by  the  English  Naviga- 
tion Laws.  In  fact,  foreign  commerce  had  been 
the  most  dominant  and  characteristic  feature  of 
colonial  economy.15  Trade  with  the  West  Indies, 
at  least  before  the  Molasses  Act,  was  very  lucra- 
tive, and  by  it  the  northern  colonies  satisfied  their 
adverse  trade  balance  with  England.0  Under 
protection  of  the  Empire  the  colonies  were  fast 

a  Works,  vol.  11,  p.  47,  The  Federalist,  No.  7. 
b  Callender,  G.,  Economic  History  of  the  United  States,  p.  6. 
c  Day,  C.,  History  of  Commerce,  Sec.  578. 
[23] 


ALEXANDER  HAMILTON 


becoming  leaders  in  the  arts  of  navigation  and  in 
shipbuilding.  But  after  the  break  with  England 
the  power  to  regulate  commerce,  instead  of  being 
given  to  the  Congress  of  the  Confederation,  was 
reserved  to  the  separate  States.  Similar  evils  to 
those,  produced  by  lack  of  national  regulation  of 
internal  commerce,  arose.  When  the  Confedera- 
tion made  a  commercial  treaty,  it  was  powerless  to 
enforce  it  as  the  supreme  law  of  the  land;  it  could 
only  recommend,  and  any  State  that  chose  to  dis- 
regard the  recommendation  could  do  so  with  im- 
punity. Each  State,  pursuing  its  selfish  interest, 
tried  to  regulate  its  own  foreign  commerce.  As  a 
result,  the  States  presented  to  the  outside  world  no 
united  front ;  foreign  States  found  that  they  could 
not  depend  on  the  promises  of  the  Confederation 
and  the  United  States  became  an  object  of  scorn 
in  European  circles.  It  was  Hamilton's  idea  that 
until  the  States  would  yield  their  local  interests  to 
the  interests  of  the  nation;  until  they,  as  a  united 
nation,  would  take  common  measures  of  regula- 
tion and  retaliation,  they  would  not  be  able  to  ob- 
tain any  concessions  from  foreign  States.  Here 
was  another  set  of  economic  conditions  forcing 
upon  the  colonist  the  establishment  of  a  national 
economy. 

Hamilton  held  up  to  the  American  people,  as  a 
solemn  warning,  the  weakness  of  the  German 
Federation.  "The  fundamental  principle,"  he 

[34] 


THE  PROBLEM 


said,  "on  which  it  rests,  that  the  empire  is  a  com- 
munity of  sovereigns,  that  the  diet  is  a  representa- 
tion of  sovereigns,  and  that  the  laws  are  addressed 
to  sovereigns,  renders  the  empire  a  nerveless  body, 
incapable  of  regulating  its  own  members,  insecure 
against  external  dangers,  and  agitated  with  un- 
ceasing fermentations  in  its  own  bowels.  The  his- 
tory of  Germany  is  a  history  of  wars  between  the 
emperor  and  the  princes  and  states;  of  wars 
among  the  princes  and  states  themselves;  of  the 
licentiousness  of  the  strong,  and  the  oppression  of 
the  weak;  of  foreign  intrusions,  and  foreign  in- 
trigues; of  requisitions  of  men  and  money  disre- 
garded, or  partially  complied  with;  of  attempts  to 
enforce  them,  altogether  abortive,  or  attended 
with  slaughter  and  desolation,  involving  the  inno- 
cent with  the  guilty;  of  general  imbecility,  confu- 
sion, and  misery."*  It  was  into  such  condition  as 
this  that  Hamilton  believed  the  American  States  to 
be  drifting.  The  same  ills  which  haunted  Ger- 
many were  appearing  in  America  under  the  gov- 
ernment of  the  Confederation.  The  German 
States,  having  no  statesman  to  weld  them  into  a 
united  nation,  had  continued  in  the  territorial 
economy  long  after  the  nations  of  Western  Europe 
had  become  united.  The  problem  which  Germany 
should  have  solved  in  the  seventeenth  century 
waited  for  its  solution  at  the  hands  of  List  and 

a  Works,  vol.  11,  pp.  146,  147,  The  Federalist,  No.  19. 
[25] 


ALEXANDER  HAMILTON 


Bismarck  in  the  nineteenth  century  and,  in  the 
meantime,  she  suffered  all  the  evils  of  a  political 
and  economic  organization  which  was  worn  out 
and  fitted  to  the  needs  of  another  age.  This  prob- 
lem of  transition  from  territorial  to  national 
economy  was  the  same  problem  that  the  American 
States  were  facing  in  the  eighties  of  the  eighteenth 
century.  The  words  of  Schmoller,  spoken  of 
those  nations  which  had  their  rise  in  the  seven- 
teenth century,  sound  strangely  apt  when  applied 
to  the  situation  confronting  Hamilton.  "The 
question  now  was  ....,"  he  says,  uto  bring 
about,  as  far  as  possible,  on  the  basis  of  common 
national  and  religious  feelings,  a  union  for  ex- 
ternal defence  and  for  internal  justice  and  ad- 
ministration, for  currency  and  credit,  for  trade 
interests  and  the  whole  economic  life,  which  should 
be  comparable  with  the  achievements  in  its  time, 
of  the  municipal  government  in  relation  to  the 
town  and  its  environs."*  The  struggle  which 
Colbert  waged  in  France  during  the  last  half  of 
the  seventeenth  century  against  municipal  and 
provincial  influence,  and  which  List  waged  in 
Germany  during  the  first  half  of  the  nineteenth 
century  against  local  and  narrowing  authority, 
was  the  same  struggle  to  which  Hamilton  applied 
his  constructive  genius  during  the  last  part  of  the 
eighteenth  century.  With  the  growing  spirit  of 

a  Schmoller,  G.,  The  Mercantile  System,  p.  49. 
[26] 


THE  PROBLEM 


nationality,  with  the  necessity  for  commercial 
treaties  with  other  nations,  with  the  increase  of 
communication  and  internal  commerce,  the  old 
colonial  economy,  with  its  local  and  narrow  preju- 
dices, with  its  self-pride  and  love  of  power,  be- 
came an  obstacle  to  progress.* 

Hamilton's  problem,  then,  as  he  saw  it,  was  to 
establish  a  strong,  efficient  government  which 
would  conserve  the  fruits  of  independence,  which 
would  prevent  the  colonial  economy  from  per- 
petuating itself,  and  under  which  men,  in  security, 
might  develop  the  dormant  resources  of  the 
country.  The  nation  needed  the  fostering  care  of 
human  genius.  Human  energy  which  wasted  it- 
self, spreading  over  a  wide  territory,  needed  to  be 
concentrated;  the  simple  to  be  supplanted  by  a 
more  complex  life;  new  wants  awakened;  manu- 
factures for  which  the  country  furnished  abun- 
dant raw  material,  encouraged;  agriculture  im- 
proved; and  the  nation  made  one  interdependent, 
efficient,  economic  unit,  strengthened  by  division  of 
labor  within  and  united  effectively  against  compet- 
ing nations  without. 

The  problem  confronting  Hamilton  had  not 
only  a  political  and  economic,  but  also  a  philo- 
sophic aspect.  The  ideas  of  Natural  Rights  were 
the  popular  ideas  of  his  time.  They  were  a  pro- 
duct of  that  great  movement  away  from  mediaeval 

*  Cf.  Schmoller,  G.,  The  Mercantile  System,  p.  49. 
[27] 


ALEXANDER  HAMILTON 


authority — the  movement  which  in  religion  broke 
the  grip  of  the  clergy;  which  in  philosophy  swept 
away  the  quibbles  of  the  schoolmen;  which  in 
politics  proclaimed  that  all  men  are  created  equal 
and  that  they  are  endowed  with  certain  inalien- 
able rights  which  rulers  disregard  at  their  peril; 
and  which,  in  economics,  held  up,  as  futile,  the 
regulations  and  restrictions  of  the  past,  and  urged 
upon  men  the  "obvious  and  simple  system  of 
natural  liberty."  Both  the  ideas  put  by  Jefferson 
in  the  preamble  of  the  Declaration  of  Independ- 
ence and  the  principles  of  natural  liberty  in  the 
writings  of  Adam  Smith,  are  expressions  of  this 
great  movement.  It  demands  the  largest  possible 
amount  of  individual  freedom,  which  meant  in 
politics  a  weak,  decentralized  government  and  in 
economics  freedom  in  industry  and  trade.  As  a 
young  patriot,  enthusiastic  over  the  American  op- 
position to  George  the  Third,  Hamilton  used  some 
of  the  catch  phrases  of  this  philosophy,*  but  when 
he  became  a  statesman,  interested  in  the  security 
and  development  of  the  American  nation,  he  re- 
garded them  as  inapplicable  to  the  conditions  of 
America  and  therefore  opposed  them.  He  op- 
posed them  in  particular  because  they  became  the 
philosophic  support  for  the  partisans  of  France, 
the  party  of  disunion,  and  the  advocates  of  com- 
plete freedom  in  economic  affairs. 

*  Cf.  Works,  vol.  1,  pp.  1-177. 

[28] 


THE  PROBLEM 


In  view  of  the  problem  which  confronted  Ham- 
ilton it  may  be  well  in  this  connection  to  consider 
the  effect  which  the  founding  of  the  new  govern- 
ment had  on  the  prosperity  of  America.  So  emi- 
nent an  authority  as  Callender  seems  to  think  that 
government  had  nothing  to  do  with  hard  times  in 
1785-86,  or  with  good  times  in  1789-90.  "Just 
as  hard  times,"  he  says,  "had  brought  failure  to 
the  old  confederation,  so  prosperity,  if  it  did  not 
actually  cause  the  success  of  the  new  government, 
greatly  simplified  the  problem  of  its  establishment. 
One  may  well  wonder  what  would  have  been  the 
fate  of  Hamilton's  brilliant  projects,  the  refund- 
ing of  the  debt,  and  the  establishment  of  a  revenue 
system,  if  they  had  been  tried  on  the  country 
during  the  economic  gloom  of  1785-86."*  In  sup- 
port of  his  position  he  cites  some  interesting  letters 
of  Washington.  "The  people,"  Washington 
writes  to  Jefferson  in  1788,  "have  been  ripened 
by  misfortune  for  the  reception  of  a  good  govern- 
ment. They  are  emerging  from  the  gulf  of  dissi- 
pation and  debt,  into  which  they  had  precipitated 
themselves  at  the  close  of  the  war.  Economy  and 
industry  are  evidently  gaining  ground."b  "Many 
blessings,"  he  writes  to  Lafayette  in  the  same 

a  Callender,  G.  S.,  Economic  History  of  the  United  States, 
p.  182. 

b  Washington,  Writings  (Sparks  edition),  vol.  9,  p.  427.  To 
Jefferson,  August  31,  1788. 

[29] 


ALEXANDER  HAMILTON 


year,  "will  be  attributed  to  our  new  government 
which  are  now  taking  their  rise  from  that  industry 
and  frugality,  into  the  practice  of  which  the  people 
have  been  forced  from  necessity."*  It  is  inter- 
esting, however,  to  note  that  three  years  later, 
Washington,  in  letters  not  quoted  by  Callender, 
was  more  willing  to  emphasize  the  beneficial 
effects  of  the  new  government.  "The  United 
States,"  he  writes  in  1791,  "enjoy  a  scene  of  pros- 
perity and  tranquillity  under  the  new  government, 
that  could  hardly  have  been  hoped  for  under  the 
old."b  "In  a  tour,"  he  writes  again  in  the  same 
year,  "which  I  made  last  spring  through  the 
southern  states,  I  confirmed  by  observation  the 
accounts  which  we  had  all  along  received  of  the 
happy  effects  of  the  general  government  upon  our 
agriculture,  commerce,  and  industry."0  Washing- 
ton seems  to  have  regarded  the  prosperous  condi- 
tion of  the  country  during  his  first  administration 
due,  not  merely  to  "the  goodness  of  Providence" 
which  brought  good  crops,  but  also  to  security 
"under  an  energetic  government"  and  to  the  har- 
mony, industry,  and  confidence  of  the  people. 

It  is  not  unreasonable  to  believe  that  changes 
in,  or  the  policies  of,  government  may  affect  the 

albid.,  vol.  9,  p.  382.  To  Lafayette,  June  18,  1788. 
blbid.,  vol.  10,  p.  169.  To  Mrs  Graham,  July  19,  1791. 
c  Washington,  Writings,  vol.  10,  p.  189.    To  Luzerne,  Septem- 
ber 10,  1791. 

[30] 


THE  PROBLEM 


motive  of  a  whole  nation.  Some  men  believe,  as 
has  been  pointed  out,  that  the  Franco-German 
War  and  the  union  brought  about  by  Bismarck 
revolutionized  the  spirit  of  the  German  people. 
Before  1871,  the  land  was  just  as  fertile,  the 
resources  just  as  rich,  and  the  opportunities  poten- 
tially as  numerous  as  after  the  war.  But  after  the 
war  the  people,  ambitious  for  the  dominance  of 
the  German  race  and  institutions,  entered  the 
international  struggle  for  military  prowess,  for 
colonies,  and  for  commercial  and  industrial  su- 
premacy. Here  is  a  condition  which  seems  partly 
ascribable  to  the  revival  of  the  spirit  of  enterprise 
and  national  ambition  among  the  people. 

Now  apply  this  to  the  American  nation  in  1789. 
"Ripened  by  misfortune"  under  the  Confedera- 
tion, the  people  were  coming  out  of  the  "blues." 
The  establishment  of  the  new  government  and  the 
policies  inaugurated  by  Hamilton  were  political 
events  which  set  in  motion  thousands  of  stimuli. 
The  mere  idea  of  being  a  great  nation,  able  to  de- 
fend our  rights  against  others,  added  to  the  con- 
fidence of  the  people.  "Has  not  your  industry," 
Hamilton  asked  in  1801,  "found  aliment  and  in- 
citement in  the  salutary  operation  of  your  govern- 
ment— in  the  preservation  of  order  at  home — in 
the  cultivation  of  peace  abroad — in  the  invigora- 
tion  of  confidence  in  pecuniary  dealings — in  the 

[31] 


ALEXANDER  HAMILTON 


increased  energies  of  credit  and  commerce — in  the 
extension  of  enterprise,  ever  incident  to  a  good 
government  well  administered?"11  Without  deny- 
ing any  of  the  many  causes  which  brought  pros- 
perity under  the  new  government,  one  of  the  most 
important,  undoubtedly,  was  the  "vivifying  influ- 
ence of  an  efficient  and  well-constructed  govern- 
ment." The  American  nation  was  just  as  rich 
materially  before  1789  as  it  was  after.  It  had 
the  same  unlimited  resources  and  numerically  the 
same  population.  The  element  in  the  equation 
which  made  the  striking  difference  was  psycho- 
logical. This  new  revival  of  feeling  was  as  much 
a  cause  as  a  result  of  economic  conditions.  It  was 
also  as  much  a  result  as  a  cause  of  the  success  of 
the  new  government.  When  credit  was  created, 
the  finances  reorganized,  prosperity  secured,  com- 
merce protected,  and  industry  encouraged,  there 
was  a  reawakening  of  the  national  consciousness 
that  was  a  powerful  cause  of  both  our  political 
and  economic  success.  At  this  time  the  temper  of 
the  American  people  began  to  change  from  the 
easy-going  temper  which  characterized  the  colonial 
times  to  the  strenuous,  nervous,  and  enterprising 
spirit  which  is  now  the  proverbial  feature  of 
American  life.  "Laws,"  asserts  Say,  "are  not  able 
to  create  wealth."  "Certainly  they  are  not,"  List 

a  Works,  vol.  8,  pp.  241,  242. 

[32] 


THE  PROBLEM 


answers,  ubut  they  create  productive  power  which 
is  more  important  than  wealth."* 

When  in  the  evolution  of  society  the  time  comes 
for  a  change  from  the  narrower  and  less  efficient  to 
the  broad  and  more  efficient  organization,  if  no 
statesman  appears  to  brush  aside  the  rubbish  of 
the  past,  the  old  institutions  will  petrify  and  de- 
terioration will  set  in.  Germany  in  the  seven- 
teenth century,  when  the  nations  of  the  west  under 
the  direction  of  great  mercantilist  statesmen  were 
rising  to  power,  hung  with  tenacity  to  her  old  po- 
litical and  economic  forms.  "It  was  not  simply 
the  external  loss  in  men  and  capital,"  Schmoller 
with  confidence  asserts,  "which  brought  about  this 
retrogression  of  Germany,  during  a  period  of 
more  than  one  century,  in  comparison  with  the 
Powers  of  the  West ;  it  was  not  even  the  transfer- 
ence of  the  world's  trading  routes  from  the  Medi- 
terranean to  the  ocean  that  was  of  most  con- 
sequence ;  it  was  the  lack  of  politico-economic  or- 
ganization, the  lack  of  consolidation  in  its 
forces."b 

The  task  of  Hamilton  was  to  save  the  United 
States  from  a  like  fate  with  Germany.  Here  the 
same  struggle  which  was  Germany's  in  the  seven- 
teenth century,  and  which  Bismarck  had  to  face  in 

aList,  F.,  Das  Nationale  System  der  Politischen  Oekonomie, 
ch.  12. 

b  Schmoller,  G.,  The  Mercantile  System,  p.  48. 

[33] 


ALEXANDER  HAMILTON 


the  nineteenth  century — the  struggle  between  par- 
ticularism and  nationalism — was  present.  Local 
prejudices  were  deeply  imbedded  in  the  minds  of 
the  people.  Traditions,  once  useful,  were  an 
obstacle  to  progress.  State  loyalties  in  America, 
as  local  dynasties  in  Germany,  clung  to  the  altars 
of  the  past.  Both  countries  were  a  collection  of 
jealous  states,  opposed  to  any  central  government 
that  might  encroach  on  their  sovereignty.  Both 
were  suffering  from  "the  aristocracy  of  State  pre- 
tensions." Both  had  a  common  basis  for  nation- 
ality— race,  institutions,  and  commercial  interests. 
But  these  sentimental  bonds  were  not  strong 
enough  to  overcome  local  prejudice.  The  jealousy 
of  local  units  in  both  countries  opposed  the  delega- 
tion of  power  to  a  general  government.  The 
German  Diet  had  no  more  authority  than  had  the 
Congress  of  the  Confederation.  Both  bodies 
proved  the  truth  of  Washington's  saying:  "In- 
fluence is  not  government."4  Local  dynasties  in 
Germany  and  State  sovereignty  in  America  stood 
in  the  way  of  national  greatness.  Both  Hamilton 
and  Bismarck  solved  the  problem  along  the  lines 
of  national  tradition.  Bismarck  built  his  Union  on 
the  dynastic  traditions  of  his  people ;  Hamilton  on 
the  republican  traditions  of  his.  Each  realized  the 
need  of  clothing  his  nation  with  a  government 

a  Washington,  Writings,  vol.  9,  p.  204.    To  Henry  Lee,  October 
31,  1786. 

[34] 


THE  PROBLEM 


which  would  fit.  In  Germany,  when  power  was 
taken  from  the  local  dynasties,  the  people  were 
given  a  central  prince  on  whom  they  could  con- 
centrate their  attachment  ;a  in  America  when  the 
States  were  circumscribed  within  bounds,  their 
citizens  were  given  a  strong  Republic  which  they 
might  be  loyal  to.  Each  statesman  fitted  the 
government  to  the  needs  and  temperaments  of  his 
people  and  both  governments  have  endured  be- 
cause their  foundations  are  laid  in  racial  ten- 
dencies  which  are  psychologically  sound. 

Genius,  it  has  been  said,  is  in  league  with  history. 
History  shows  that  the  units  of  society  with  each 
succeeding  age  become  larger  and  larger.  The 
town  supplants  the  manorial  economy;  the  terri- 
torial the  town;  and  the  national  the  territorial. 
But  this  natural  tendency  is  only  potential,  and 
requires  the  directing  genius  of  a  statesman  to 
make  it  effective.  The  United  States  in  1789  was 
ready  to  change  from  the  territorial  to  the  na- 
tional stage,  but  without  the  work  of  the  great 
men  of  that  period,  among  whom  the  constructive 
mind  of  Hamilton  exerted  such  a  strong  influence, 
we  might  have  drifted  listlessly — a  group  of 
quarreling  states. 

a  Cf.  Bismarck,  Gedanken  und  Erinnerungen,  ch.  13. 


[35] 


CHAPTER  FOURTH 

NATIONAL  DEFENCE  AND  NEUTRALITY 

A  sovereign  nation  outside  of  Europe,  with  its 
own  interests  and  policies,  was  to  the  European 
statesman  of  the  eighteenth  century  an  unthinkable 
fact.  When  the  American  nation  became  the  first 
exception,  they,  while  nominally  recognizing  our 
independence,  actually  treated  us  as  colonies.  It 
was  only  by  wise  statesmanship  that  our  political 
independence,  once  won,  was  reaffirmed.  Europe 
was  reluctant  to  give  us  more  than  the  crumbs  of 
justice.  It  was  easy  enough  for  her  to  acknowl- 
edge our  international  rights  on  paper;  it  meant, 
however,  a  complete  change  in  her  politics  to 
acknowledge  them  in  fact. 

Hamilton  was  far  more  interested  in  domestic 
than  in  foreign  affairs.  But  his  position  in  Wash- 
ington's cabinet,  which  was  practically  that  of 
Prime  Minister,  forced  him  to  concern  himself 
with  foreign  relations.  In  1794,  war  was  threat- 
ened with  Great  Britain.  At  the  crisis  of  the 
situation,  he  wrote  to  Washington  that  he  favored 
the  following  course  of  conduct:  "to  take  effectual 
measures  of  military  preparation,  creating,  in 
earnest,  force  and  revenue;  to  vest  the  President 
with  important  powers  respecting  navigation  and 

[36] 


DEFENCE  AND  NEUTRALITY 

commerce  for  ulterior  contingencies — to  endeavor 
by  another  effort  of  negotiation,  confided  to  hands 
able  to  manage  it,  and  friendly  to  the  object,  to 
obtain  reparation  for  the  wrongs  we  suffer,  and 
a  demarcation  of  a  line  of  conduct  to  govern  in 
future;  to  avoid,  till  the  issue  of  that  experiment, 
all  measures  of  a  nature  to  occasion  a  conflict  be- 
tween the  motives  which  might  dispose  the  British 
government  to  do  us  the  justice  to  which  we  are 
entitled,  and  the  sense  of  its  own  dignity.  If  that 
experiment  fails,  then,  and  not  till  then,  to  resort 
to  reprisals  and  war."a 

John  Jay  was  appointed,  two  days  after  the 
above  passage  was  written,  to  negotiate  a  treaty 
with  Great  Britain.  On  November  19,  1794,  the 
Jay  Treaty  was  concluded  at  London.  Hamilton 
defended  it  against  a  storm  of  opposition  in  a 
series  of  papers,  signed  "Camillus."  He  de- 
fended it  from  every  angle  of  international  law 
and  expediency;  and  especially  because  it  would 
bring  peace.  "If  we  can  avoid  a  war  for  ten  or 
twelve  years  more,"  he  says,  "we  shall  then  have^ 
acquired  a  maturity  which  will  make  it  no  more  . 

than  a  common  calamity This  is  the  most 

effectual  way  to  disappoint  the  enemies  of  our  wel- 
fare  If  there  be  a  foreign  power  which  sees 

with  envy  or  ill-will  our  growing  prosperity,  that 
power  must  discern  that  our  infancy  is  the  time  for 

*  Works,  vol.  5,  p.  98.    To  Washington,  April  14,  1794. 
[37] 


ALEXANDER  HAMILTON 


clipping  our  wings.  We  ought  to  be  wise  enough 
to  see  that  this  is  not  a  time  for  trying  our 
strength. "a  He  furthermore  favored  the  treaty, 
because  it  strengthened  the  party  of  law  and  order 
at  home ;  because,  by  turning  over  to  us  the  west- 
ern posts,  it  bound  the  east  and  west  more  securely 
together;  and  because  it  gave  us  control  of  the 
Mississippi  and  of  the  fur  trade  of  the  north.  To 
him  the  Jay  Treaty  did  little  less  than  save  the 
Union. 

Our  relations  with  France  were  more  compli- 
cated and  more  hostile  to  our  nationality  than  our 
relations  with  England.  There  was  much  senti- 
mental talk  about  our  debt  of  gratitude  to  France. 
Hamilton,  while  recognizing  the  service  she  had 
rendered  us  during  the  Revolution,  saw  that  it  was 
not  until  after  that  decisive  event,  the  capture  of 
Burgoyne,  that  she  sent  assistance,15  and  that  it  was 
not  love  for  us  but  hatred  of  England  which  in- 
duced her  to  act.  "The  primary  motive  of  France 
for  the  assistance  she  gave  us,"  Hamilton  remarks, 
"was  obviously  to  enfeeble  a  hated  and  powerful 
rival  by  breaking  in  pieces  the  British  Empire.  A 
secondary  motive  was  to  extend  her  relations  of 
commerce  in  the  New  World,  and  to  acquire  addi- 
tional security  for  her  possessions  there,  by  form- 
ing a  connection  with  this  country  when  detached 

a  Works,  vol.  5,  pp.  206,  207.     Camillas,  No.  2. 
b  Works,  vol.  6,  p.  206.     France,  1796. 

[38] 


DEFENCE  AND  NEUTRALITY 

from  Great  Britain. "a  France  did  not  favor  the 
growth  of  a  strong  American  nation;  she  wished 
to  transfer  our  colonial  relation  from  England  to 
herself.  "She  patronized,"  Hamilton  says,  "our 
negotiation  with  Great  Britain  without  the  pre- 
vious acknowledgment  of  our  independence; — a 
conduct  which  ....  can  only  be  rationally  explained 
into  the  desire  of  leaving  us  in  such  a  state  of  half 
peace,  half  hostility  with  Great  Britain  as  would 
necessarily  render  us  dependent  upon  France."1 
France  was  trying  to  use  the  United  States  to  gain 
back  that  which  she  had  lost  in  the  Seven  Years 
War;  but  Hamilton  understood  the  struggle  be- 
tween England  and  France  for  empire,  and  the 
keystone  of  his  foreign  policy  became  protection 
from  them  both.  It  was  the  keen  insight  into  the 
affairs  of  the  world,  by  a  man  who  had  never  been 
in  Europe,  which  led  Talleyrand  to  say  of  him, 
"77  a  divine  I' Europe." 

In  January,   1797,  Hamilton  wrote  to  Wash- 
ington:    "My    anxiety   to    preserve    peace   with 

France  is  known  to  you Yet  there  are  bounds 

to  all  things We  seem  to  be  where  we  were 

with  Great  Britain  when  Mr.  Jay  was  sent  there, 
and  I  cannot  discern  but  that  the  spirit  of  the 
policy,  then  pursued  with  regard  to  England,  will 
be  the  proper  one  now  in  respect  to  France — viz., 

a  Works,  vol.  6,  p.  207.  France,  1796. 
b  Works,  vol.  6,  p.  209.     France,  1796. 
[39] 


ALEXANDER  HAMILTON 


a  solemn  and  final  appeal  to  the  justice  and  interest 
of  France,  and  if  this  will  not  do,  measures  of 
self-defence.  Anything  is  better  than  absolute 
humiliation.  France  had  already  gone  much 
further  than  Great  Britain  ever  did."a  John 
Adams  became  President  in  March,  and  appointed 
three  envoys  to  try  to  adjust  our  difficulties  with 
France.  The  Directory  refused  to  recognize  the 
commission  without  bribery.  French  privateers 
were  committing  depredations  on  our  commerce, 
and  intercepting  our  trade  with  her  enemies.b 
We  were  on  the  verge  of  war.  Hamilton,  in  1798, 
published  "The  Stand,"0  in  which,  in  the  most 
vigorous  language,  he  denounced  the  action  of 
France,  and  attempted  to  rouse  public  opinion  in 
defence  of  our  national  honor. 

National  dishonor  was  bad  enough,  but,  con- 
sidering our  weakness  as  a  nation,  a  certain 
amount  of  it  could  be  endured.  Hamilton,  how- 
ever, was  discerning  enough  to  grasp  the  real 
meaning  of  the  aggressive  policy  of  France.  "The 
prominent  original  feature  of  her  Revolution,"  he 
said,  "is  the  spirit  of  proselytism,  or  the  desire  of 
new-modeling  the  political  institutions  of  the  rest 
of  the  world  according  to  her  standard."d  He 

a  Works,  vol.  10,  p.  230.    To  Washington,  January  19,  1797. 
b  Works,  vol.  10,  p.  238.    To  King,  February  15,  1797. 
c  Works,  vol.  6,  pp.  259-318. 
d  Works,  vol.  6,  p.  274.    The  Stand,  April  4,  1798. 

[40] 


DEFENCE  AND  NEUTRALITY 

saw  that  in  her  effort  to  carry  the  ideas  of  the 
Revolution  to  the  rest  of  the  world,  she  was 
destroying  nationalities.  Might  not  the  fate  of 
America  be  that  of  Italy?  No  wonder  Hamilton, 
whose  chief  dream  was  the  greatness  of  the  Ameri- 
can state,  hated  a  nation  that  tried  to  make  its 
institutions  the  law  of  every  other.  "Like  the 
prophet  of  Mecca,"  he  writes,  "the  tyrants  of 
France  press  forward  with  the  alcoran  of  their 
faith  in  one  hand  and  the  sword  in  the  other  .... 
France,  swelled  to  a  gigantic  size,  and  aping 
ancient  Rome  except  in  her  virtues,  plainly  med- 
itates the  control  of  mankind,  and  is  actually 
giving  the  law  to  nations. "a  If  successful  France's 
ambition  would  destroy  his  most  cherished  hope 
— the  American  nation.b 

Was  Hamilton  deceived  in  thinking  that  the 
ambition  of  France  extended  to  America?  For 
centuries  she  had  been  struggling  to  gain  or  defend 
her  colonial  empire.  In  England  she  had  found 
her  severest  competitor,  and  the  Napoleonic  wars 
were,  in  truth,  the  culmination  of  the  struggle. 
This  national  hope  and  the  proselytism  of  the 
Revolution  embodied  themselves  in  Napoleon. 
Napoleon's  conquests  in  Europe  were  merely  a 
means  to  an  end.  His  ambition  was  world- 
empire.  "Napoleon,"  Seeley  says,  "did  not  care 

a  Works,  vol.  6,  pp.  280,  281.    The  Stand,  April  7,  1798. 
t>Cf.  Works,  vol.  6,  pp.  332,  333. 
[41] 


ALEXANDER  HAMILTON 


about  Europe.  'Cette  vieille  Europe  m'ennuie,' 
he  said  frankly.  His  ambition  was  all  directed 
towards  the  new  world.  He  is  the  Titan  whose 
dream  it  is  to  restore  that  Greater  France  which 
had  fallen  in  the  struggles  of  the  eighteenth  cen- 
tury, and  to  overthrow  that  Greater  Britain  which 
has  been  established  on  its  ruins. "a  When  we 
realize  the  real  intent  of  France,  and  when  we  see 
the  proof  of  world-ambition  in  Napoleon's  expedi- 
tion against  Egypt  and  in  his  acquisition  of  Louis- 
iana, we  perceive  how  truly  Hamilton  divined 
Europe.  Just  before  we  acquired  Louisiana, 
Hamilton  said  that  the  cession  of  that  territory  to 
France  threatened  "the  early  dismemberment  of 
a  large  portion  of  the  country;  more  immediately, 
the  safety  of  all  the  Southern  States;  and  remote- 
ly, the  independence  of  the  whole  Union."b  He 
wishes  also  to  thwart  France's  ambition  for  uni- 
versal empire  by  detaching  South  America  from 
Spain,  because  the  gold  of  those  countries  was 
flowing  into  the  coffers  of  France.0 

It  was  Hamilton's  belief  that  the  true  family 
compact  hoped  for  by  Genet  was  a  Pandora  box; 
it  would  inevitably  make  us  a  mere  satellite  of 
France  ;d  it  would  destroy  our  national  existence. 

aSeeley,  J.  R.,  The  Expansion  of  England,  p.  105. 
b  Works,  vol.  6,  p.  334.     Pericles,  1803. 
c  Works,  vol.  10,  p.  339.    To  Otis,  January  26,  1799. 
d  Works,  vol.  5,  p.  184.     Horatius,  May,  1795. 

[42] 


DEFENCE  AND  NEUTRALITY 

The  French  party,  by  trying  to  force  the  govern- 
ment to  assist  France,  were  putting  in  jeopardy  our 
nationality.  Our  treaty  with  France  was  defen- 
sive only;  her  war  against  the  First  Coalition  was 
offensive;  we  therefore  had  no  treaty  obligation. 
"Why  then  should  we,"  Hamilton  asks,  uby  a  close 
political  connection  with  any  power  of  Europe, 
expose  our  peace  and  interest,  as  a  matter  of 
course,  to  all  the  shocks  with  which  their  mad 
rivalship  and  wicked  ambition  so  frequently  con- 
vulse the  earth ?"a  Our  true  policy,  he  held,  was: 
"Peace  and  trade  with  all  nations;  beyond  our\ 
present  engagements,  political  connection  with 


none."b 


The  foreign  policy  of  the  Federalists  was  vigor- 
ously national;  it  saved  the  young  and  weak  nation 
from  being  wrecked  on  the  rock  of  foreign  wars. 
Had  we  gone  to  war  with  England  in  1 794,  or  had 
we  joined  France  later  against  the  First  Coalition, 
our  independence,  if  not  actually  lost,  would  have 
been  endangered.  "The  Federalists,"  Sumner 
says,  "met  a  demand  for  sentimental  politics  in  for- 
eign policy,  and  for  a  connection  between  this 
country  and  a  foreign  nation,  in  which  relation  this 
country  would  be  a  very  inferior  and  dependent 
party,  by  doctrines  of  complete  national  independ- 
ence and  impartial  neutrality Both  in  and  out 

a  Works,  vol.  5,  p.  185.  Horatius,  May,  1795. 
b  Works,  vol.  5,  p.  184.  Horatius,  May,  1795. 
[43] 


ALEXANDER  HAMILTON 


of  office  Hamilton's  mind  was  the  one  which 
guided  and  prevailed  in  that  policy."*  Hamilton 
wished  the  United  States  to  be  let  alone  to  work 
out  her  own  greatness,  and  all  the  work  which  he 
did,  trying  to  keep  Europe  out  of  our  affairs  and 
Americans  out  of  European  affairs,  was  in  the 
direct  line  of  his  deepest  interests.  He  wished  to 
establish  a  great,  self-sufficient  nation,  indepen- 
dent of  all  outside  influence.  This  national  plan 
was  early  in  Hamilton's  mind.  "Let  the  thirteen 
States,"  he  said  in  the  Federalist,  "bound  together 
in  a  strict  and  indissoluble  Union,  concur  in  erect- 
ing one  great  American  system,  superior  to  the 
control  of  all  transatlantic  force  or  influence,  and 
able  to  dictate  the  terms  of  the  connection  be- 
tween the  old  and  the  new  world!"b 

The  policy  of  neutrality  of  Washington's  ad- 
ministration was  a  wise  effort  to  keep  the  Ameri- 
can nation  at  peace  when  the  rest  of  the  world  was 
at  war.  War,  at  that  time,  would  have  subjected 
our  commerce  to  the  privateers  of  the  enemy  when 
we  had  no  adequate  navy  to  protect  it.  It  would 
have  destroyed  our  mercantile  and  shipping  capi- 
tal. It  would  have  disorganized  the  life  of  the 
new  nation  which  was  just  recovering  from  the  dis- 
sipation of  the  period  of  the  Confederation;  and 
would  have  set  loose  the  latent,  turbulent  and  de- 

aSumner,  W.   G.,  Alexander  Hamilton,  p.  223. 
b  Works,  vol.  11,  p.  88.    The  Federalist,  No.  11. 

[44] 


DEFENCE  AND  NEUTRALITY 

structive  passion  in  the  people;  wrecked  our 
strength  and  resources ;  and  checked  irretrievably 
our  progress.  It  would  have  threatened  our  west- 
ern territory,  which  was  so  necessary,  in  Hamil- 
ton's mind,  to  the  expansion  of  the  Union.  It 
would  have  increased  the  public  debt  and  sub- 
jected a  people,  always  opposed  to  taxation,  to 
added  burdens.  There  are  times  when  war  might 
be  necessary  and  useful  to  a  nation;  but  Hamilton 
was  sure  that  our  situation  was  not  one  of  them. 
In  1794,  seeing  the  country  in  an  "unexampled 
state  of  prosperity,"  he  said:  "If  while  Europe  is 
exhausting  herself  in  a  destructive  war,  this 
country  can  maintain  its  peace,  the  issue  will  open 
to  us  a  wide  field  of  advantages,  which  even  imagi- 
nation can  with  difficulty  compass."4 

In  1793,  at  the  height  of  the  Genet  affair, 
Washington  set  forth  the  policy  of  the  administra- 
tion in  the  Proclamation  of  Neutrality.  Hamil- 
ton defended  it  against  the  attacks  of  the  French 
party  in  his  papers  signed  "Pacificus."b  The  pur- 
pose of  the  proclamation,  he  says,  is  to  inform  all 
that  we  are  at  peace,  and  not  associated  with  either 
belligerent,  and  that  we  will  perform  the  duties  of 
neutrals.0  He  considered  self-preservation  the 

a  Works,  vol.  5,  p.  86.     Americanus,  February  8,  1794. 
*  Works,  vol.4,  pp.  432-489. 
c  Works,  vol.  4,  p.  432. 

[45] 


ALEXANDER  HAMILTON 


first  duty  of  the  nation.*  "The  rule  of  morality 
....,"  he  says,  "is  not  precisely  the  same  between 
nations  as  between  individuals.  The  duty  of  mak- 
ing its  own  welfare  the  guide  of  its  actions  is  much 
stronger  upon  the  former  than  upon  the  latter,  in 
proportion  to  the  greater  magnitude  and  import- 
ance of  national  compared  with  individual  happi- 
ness and  to  the  greater  permanency  of  the  effects 
of  national  than  of  individual  conduct.  Existing 
millions,  and  for  the  most  part  future  generations, 
are  concerned  in  the  present  measures  of  a  govern- 


ment."15 


The  great  contribution  of  the  United  States  to 
International  Law  is  the  doctrine  of  neutrality. 
Well  grounded  as  it  is  today,  it  was  not  recog- 
nized prior  to  the  nineteenth  century  by  the  great 
nations.  This  principle  was  the  corner  stone  of 
the  foreign  policy  of  the  Federalists.  Hamilton 
was  not  only  its  chief  author,  but  its  chief  advo- 
cate and  defender.  In  defining  it,  he  said:  "It  is 
to  make  known  to  the  Powers  at  war,  and  to  the 
citizens  of  the  country  whose  government  does  the 
act,  that  such  country  is  in  the  condition  of  a  na- 
tion at  peace  with  the  belligerent  parties,  and 
under  no  obligations  of  treaty  to  become  an  asso- 
ciate in  the  war  with  either,  and  that  this  being  its 
situation,  its  intention  is  to  observe  a  correspond- 

a  Works,  vol.  4,  p.  457.    Pacificus,  July  6,  1793. 
b  Works,  vol.  4,  p.  464.    Pacificus,  July  10,  1793. 

[46] 


DEFENCE  AND  NEUTRALITY 

ing  conduct  by  performing  towards  each  the  duties 
of  neutrality;  to  warn  all  persons  within  the  juris- 
diction of  that  country  to  abstain  from  acts  that 
shall  contravene  those  duties,  under  the  penalties 
which  the  laws  of  the  land,  of  which  the  jus  gen- 
tium is  part,  will  inflict. "a  So  devoted  was  Hamil- 
ton to  the  idea  that  he  said  that  "if  we  must  have 
a  war,  I  hope  it  will  be  for  refusing  to  depart  from 
that  principle. "b  When  the  welfare  of  the  Ameri- 
can nation  was  in  question,  he  was  a  friend  no 
more  of  Great  Britain  than  of  France.  "I  would 
mete,"  he  writes,  "the  same  measure  to  both  of 
them,  though  it  should  ever  furnish  the  extraor- 
dinary spectacle  of  a  nation  at  war  with  two  na- 
tions at  war  with  each  other."0  To  King  he  wrote : 
"We  are  laboring  hard  to  establish  in  this  country 
principles  more  and  more  national  and  free  from 
all  foreign  ingredients  so  that  we  may  be  neither 
'Greeks  nor  Trojans'  (English  nor  French)  but 
truly  Americans."3 

While  Hamilton  counseled  peace  at  almost  any 
cost  short  of  national  humiliation,  he  saw  clearly 
the  possibilities  of  war  and  the  innumerable  causes 
which  have  a  "general  and  almost  constant  opera- 
tion upon  the  collective  bodies  of  society."6  A 

a  Works,  vol.  4,  p.  434.    Pacificus,  June  29,  1793. 
b  Works,  vol.  6,  p.  228.    The  Answer,  December  6,  1796. 
c  Works,  vol.  10,  p.  294.    To  Pickering,  June  8,  1798. 
d  Works,  vol.  10,  p.  217.    To  King,  December  16,  1796. 
e  Works,  vol.  11,  p.  34.    The  Federalist,  No.  6. 

[47] 


ALEXANDER  HAMILTON 


proclamation  of  neutrality,  he  believed  was  worth 
little  unless  backed  up  by  an  army  and  navy.a 
Quick  to  grasp  a  situation,  he  saw  that  in  the 
remorseless  struggle  of  nations,  so  well  exempli- 
fied in  his  day,  a  nation,  to  be  really  sovereign, 
must  be  able  to  fight  for  its  rights;  and  that  if  it 
refused  to  be  one  of  the  millstones,  it  would  be 
ground  without  mercy  between  them. 

The  common  charge  of  the  socialist  against  the 
foreign  policy  of  modern  nations  is  that  it  allows 
the  use  of  armaments  and  diplomacy  to  further  the 
interests  of  capitalists  in  foreign  parts.  But  no 
such  charge  is  valid  against  Hamilton.  His  policy 
of  defence  and  neutrality  was  to  secure  respect  for 
the  nation  abroad  and  an  opportunity  to  develop, 
under  the  shelter  of  peace,  our  vast  national  re- 
sources at  home. 

a  Works,  vol.  11,  p.  83.    The  Federalist,  No.  11. 


[48] 


CHAPTER  FIFTH 
AUTHORITY 

The  American  people  in  the  last  part  of  the 
eighteenth  century  were  by  their  environment  pre- 
disposed to  irresponsible  democracy.  Their  rever- 
ence for  institutions  and  authority  was  scant. 
They  thought  that  they  had  had  too  much  govern- 
ment at  the  hands  of  the  English  statesmen,  and 
they  proposed*  to  have  as  little  as  possible  at  the 
hands  of  their  own.  They  regarded  government 
as  a  necessary  evil;  but,  since  it  had  to  be  endured, 
they  made  it  weak  and  powerless.  Under  the 
Confederation  they  reaped  very  different  results 
from  those  anticipated.  The  tendency  which  was 
theirs  "by  nature,"  bade  fair  to  destroy  them  and 
bring  them  to  national  nothingness.  Weakness  of 
central  control  gave  opportunities  to  local  factions 
and  sectional  interests  who  sacrificed  the  general 
for  their  particular  welfare.  The  channels  of 
commerce  were  choked;  currency  disorganized; 
authority  and  law  disregarded.  Too  little  central 
control  drove  the  nation  to  the  verge  of  ruin.  The 
excesses  of  democracy  turned  out  to  be  license, 
lawlessness,  and  unwise  factional  legislation. 

Now,  Hamilton  believed  that  there  were  some 
natural  tendencies  in  human  nature  which  for  the 
good  of  society  should  be  restrained.  Democracy 

[49] 


ALEXANDER  HAMILTON 


might  be  the  natural  bent  and  inevitable  goal  of  a 
new  country,  but  because  of  this  very  fact,  he 
thought  that  a  strong  government  was  necessary 
to  restrain  men  from  excess  and  to  support  the 
general  interest.  "I  am  much  mistaken,"  he  said, 
with  the  evils  of  the  weak  Confederation  in  mind, 
"if  experience  has  not  wrought  a  deep  and  solemn 
conviction  in  the  public  mind,  that  greater  energy 
of  government  is  essential  to  the  welfare  and  pros- 
perity of  the  community."*  To  him  in  the  "alter- 
nate sunshine  and  storm  of  liberty;"  some  force 
not  yielding  to  every  momentary  whim  of  opinion 
was  necessary  to  conserve  the  resources  of  the 
nation  and  make  the  Union  a  blessing.  For  this 
reason  he  wished  the  central  government  to  be 
energetic  and  strong,  with  powers  equal  to  its 
responsibility. 

Before  considering  Hamilton's  ideas  on  govern- 
ment we  may  find  in  the  treatment  of  the  Loyal- 
ists after  the  treaty  of  1783,  an  example  both  of 
the  entire  disregard  for  authority  and  law  which, 
at  that  time,  was  popular,  and  of  Hamilton's  cour- 
age in  the  defence  of  justice  and  order.  By  the 
treaty  England  had  made  liberal  concessions  to  us, 
in  return  for  which  we  stipulated  "that  there 
should  be  no  future  injury  to  her  adherents  among 
us."b  The  Confederation,  however,  was  power- 

a  Works,  vol.  11,  p.  203.     The  Federalist,  No.  26. 
b  Works,  vol.  4,  p.  240.    Letters  from  Phocion,  1784. 

[50] 


AUTHORITY 


less  to  make  this  provision  the  law  of  the  land,  and 
the  States  disregarded  it.  In  New  York  especially 
the  Loyalists  were  persecuted.  Attempts  were 
made  to  disfranchise  them  and  to  confiscate  their 
property.  Their  debtors  refused  their  claims  with 
impunity.  Popular  feeling  ran  high.  The  perse- 
cuted received  no  sympathy.  Against  this  appar- 
ently irresistible  tide  of  popular  animosity  Hamil- 
ton dared  to  set  himself.  He  accepted  and  won  a 
test  case  for  a  Tory  defendant  under  the  "Tres- 
pass Act."  He  also  wrote  two  public  letters*  in 
defence  of  the  treaty  rights  of  the  Loyalists.  His- 
tory records  no  more  magnificent  example  of 
courage  than  this:  Hamilton,  practically  alone, 
defending  in  the  face  of  popular  sentiment  and 
impulse  the  rights  of  a  despised  few,  and  the 
authority  of  government. 

Hamilton  defended  the  Loyalists  for  these  rea- 
sons: first,  he  opposed  making  "the  great  prin- 
ciples of  social  right,  justice,  and  honor,  the  vic- 
tims of  personal  animosity  or  party  intrigue"  ;b 
secondly,  he  thought  that  passion,  prejudice  and 
arbitrary  rule  were  bad  habits  for  the  young  nation 
to  cultivate,  and  that  since  first  impressions  and 
early  habits  give  a  lasting  bias  to  the  temper  and 
character  of  a  nation,  it  behooved  the  Americans  to 
have  scrupulous  regard  for  the  principles  of 

» Works,  vol.  4,  pp.  230-294. 

b  Works,  vol.  4,  p.  251.     Phocion,  1784. 

[51] 


ALEXANDER  HAMILTON 


justice,  moderation,  and  liberty;*  thirdly,  he  be- 
lieved it  was  bad  policy  to  drive  into  Canada  a 
moneyed  and  industrious  class  of  people. 
"There  is  a  bigotry,"  he  observed,  "in  politics  as 

well  as  in  religions While  some  kingdoms," 

he  continued,  with  such  cases  as  the  expulsion  of 
the  Huguenots  from  France  in  mind,  "were  im- 
poverishing and  depopulating  themselves  by  their 
severities  to  the  non-conformists,  their  wiser 
neighbors  were  reaping  the  fruits  of  their  folly; 
and  augmenting  their  own  numbers,  industry  and 
wealth,  by  receiving  with  open  arms  the  perse- 
cuted fugitives."1"  Instead  of  driving  out  a  stable 
element  of  our  population,  as  other  nations  had 
done,  Hamilton  wished  to  make  it  the  interests  of 
the  Loyalists  to  become  friends  of  the  new  govern- 
ment.0 They  were  a  contented  class,  with  nothing 
to  gain  by  change,  and  he  felt  that  such  a  class, 
especially  in  an  age  of  revolution,  was  indispen- 
sable to  the  founding  of  a  strong  government. 

On  June  18,  1787,  Hamilton  presented  to  the 
Philadelphia  Convention  his  plan  for  a  Constitu- 
tion.d  His  Constitution  is  an  adaptation  of  the 
theory  of  the  English  government  of  the  eigh- 
teenth century  to  American  conditions.  It  seems 

a  Works,  vol.  4,  p.  288.    Phocion,  1784. 
b  Works,  vol.  4,  p.  284.     Phocion,  1784. 
c  Works,  vol.  4,  p.  246.    Phocion,  1784. 
d  Works,  vol.  1,  pp.  347-369. 

[52] 


AUTHORITY 


very  natural  that  his  nationalistic  leanings  should 
have  led  him  to  favor  the  institutions  of  the 
nation  from  which  the  colonists  had  received  their 
traditions  and  law.  He  believed  that  the  prin- 
ciples of  government,  evolved  through  centuries 
of  experience  by  the  Anglo-Saxon  race,  would 
work  well  among  the  same  race  living  over  the  sea. 
He  advocated  a  strong  executive  restrained  by  a 
popular  will,  and  a  popular  assembly  checked  by  a 
conservative  senate.  If  government,  he  says,  is  in 
the  hands  of  the  few,  they  will  tyrannize  over  the 
many;  if  it  is  in  the  hands  of  the  many,  they  will 
tyrannize  over  the  few.  It  ought  to  be  in  the 
hands  of  both,  and  they  should  be  separate.* 
King,  Lords,  and  Commons  of  the  English 
government  became  in  Hamilton's  plan,  a  strong 
Executive,  a  conservative  Senate,  and  a  popular 
Assembly.  The  Executive  was  to  be  elected  by  a 
double  set  of  electors,  chosen  by  voters  with  prop- 
erty qualifications.  He  was  to  hold  office  during 
good  behavior,  to  have  an  absolute  veto,  and  to 
appoint  the  Governors  of  the  States  who,  in  turn, 
were  to  have  an  absolute  veto  on  State  legislation. 
Senators  were  to  be  elected  by  electors,  chosen  by 
voters  with  property  qualifications.  They  must 
have  property,  and  were  to  hold  office  during  good 
behavior.  They  were  to  be  elected,  not  from 
States,  but  from  Districts.  The  Senate  was  to 

a  Works,  vol.  1,  p.  375. 

[53] 


ALEXANDER  HAMILTON 


have  the  sole  power  of  ratifying  treaties  and  de- 
claring war.  The  Assembly  was  to  be  elected  by 
universal  manhood  suffrage.  It  was  to  have  the 
power  of  originating  money  bills.  Its  members 
were  to  hold  office  for  three  years.  It  could  not 
impeach  the  President.  "In  my  private  opinion," 
he  says,  "I  have  no  scruple  in  declaring  .... 
that  the  British  government  is  the  best  in  the 
world:  and  that  I  doubt  much  whether  anything 
short  of  it  will  do  in  America."*  In  the  midst  of 
so  many  tendencies  toward  disunion  and  anarchy 
he  thought  that  a  conservative  body,  like  the 
House  of  Lords,  with  nothing  to  gain  by  revolu- 
tion, was  necessary  to  national  security.  It  would 
be,  he  said,  a  permanent  barrier,  on  the  one 
hand,  against  a  despotic  executive,  and  on  the 
other,  against  an  impulsive  assembly,  and  would  be 
"faithful  to  the  national  interest."  "The  British 
Constitution,"  he  observed,  quoting  Neckar,  "is 
the  only  government  in  the  world  which  unites 
public  strength  with  individual  security."b 

It  seems  clear  that  Hamilton  never  expected  the 
Convention  to  accept  his  plan  in  toto.  His  pur- 
pose was  to  make  men  disposed  to  a  strong  central 
government.  Just  before  discussing  the  British 
Constitution  in  his  speech  on  June  18,  he  says: 

» Works,  vol.  1,  pp.  388,  389.     Federal   Convention,  June  18, 
1787. 
b  Works,  vol.  1,  p.  389.    Federal  Convention. 

[54] 


AUTHORITY 


"Here  I  shall  give  my  sentiments  of  the  best  form 
of  government — not  as  a  thing  attainable  by  us, 
but  as  a  model  which  we  ought  to  approach  as 
near  as  possible."* 

From  the  moment  the  Constitution  was  adopted 
he  became  its  defender  and  champion.  In  the 
struggle  for  its  ratification  in  New  York  we  see 
him  pitted  against  a  large  hostile  majority,  fight- 
ing with  reason  and  oratory  until  by  sheer  force 
of  conviction  he  triumphed.  We  see  him  day  after 
day  writing,  with  the  assistance  of  Madison  and 
Jay,  the  papers  of  the  Federalist — papers  which, 
although  written  in  hours  of  fatigue  and  times  of 
stress,  have  become  political  oracles  not  only  to 
our  judges  and  statesmen,  but  to  political  thinkers 
beyond  the  seas.b  Washington  seldom  erred  in 
judgment  and  his  opinion  of  the  Federalist  may 
serve  to  sum  up  an  all  too  brief  appreciation  of 
this  great  work.  "As  the  perusal  of  the  political 
papers  under  the  signature  of  Publius,"  he  writes 
to  Hamilton,  August  28,  1788,  "has  afforded  me 
great  satisfaction,  I  shall  certainly  consider  them 
as  claiming  a  most  distinguished  place  in  my 
library.  I  have  read  every  performance  which  has 
been  printed  on  one  side  and  the  other  of  the  great 
question  lately  agitated,  so  far  as  I  have  been  able 
to  obtain  them;  and  without  an  unmeaning  com- 

a  Works,  vol.  1,  p.  374. 

b  Hamilton,  A.  M.,  Alexander  Hamilton,  p.  454. 

[55] 


ALEXANDER  HAMILTON 


pliment  I  will  say  that  I  have  seen  no  other  so 
well  calculated,  in  my  judgment,  to  produce  convic- 
tion on  an  unbiased  mind,  as  the  production  of 
your  triumvirate.  When  the  transient  circum- 
stances and  fugitive  performances,  which  attended 
this  crisis,  shall  have  disappeared,  that  work  will 
merit  the  notice  of  posterity,  because  in  it  are 
candidly  and  ably  discussed  the  principles  of  free- 
dom and  the  topics  of  government,  which  will  be 
always  interesting  to  mankind,  so  long  as  they  shall 
be  connected  in  civil  society."* 

The  ratification  of  the  Philadelphia  document 
by  the  people  was  by  no  means  a  guarantee  of  the 
success  of  the  Union.  The  nation  was  united  on 
paper,  but  not  in  fact.  The  whole  machinery  of 
government  had  to  be  put  in  motion.  It  was  the 
task  of  the  first  administration  to  put  life  and 
meaning  into  the  paper  Constitution  and  to  apply 
the  constitutional  principles  which  lay,  as  latent 
possibilities,  back  of  the  document.  "If  we  have 
an  idea  ....,"  Sumner  says,  "that  people  who 
read  the  document  would  obtain  any  conception  of 
the  modern  state  which  goes  under  the  name  of 
the  United  States,  we  shall  make  a  great  mis- 
take."15 Realizing  that  first  impressions  and  early 
habits  count,  Hamilton,  supported  by  moral  influ- 
ence of  Washington,  set  out  to  mold  our  institu- 

a  Washington,  Writings,  vol.  9,  pp.  419,  420. 
b  Sumner,  W.  G.,  Alexander  Hamilton,  p.  141. 

[56] 


AUTHORITY 


tions,  while  they  were  plastic,  along  nationalistic 
lines.  The  Constitution  on  its  face  was  ambigu- 
ous. Had  the  friends  of  weak  government  and 
State  Rights  been  first  in  office,  the  powers  since 
exercised  by  the  Federal  Government  would  have 
been  abridged.  But  the  ideal  of  Hamilton  was  a 
strong  Union;  and  the  powers  in  the  central  gov- 
ernment which  had  been  denied  him  in  the  Con- 
vention, he  proposed  to  get  from  the  document  by 
implication. 

His  doctrine  of  implied  powers,  then,  had  for 
its  object  the  building  of  a  powerful  national 
government.*  This  principle  of  interpretation, 
developed  and  perpetuated  far  into  the  Jeffer- 
sonian  era  by  the  great  Marshall,  is:  "That  every 
power  vested  in  a  government  is  in  its  nature 
sovereign  and  includes,  by  force  of  the  term,  a 
right  to  employ  all  the  means  requisite  and  fairly 
applicable  to  the  attainment  of  the  ends  of  such 
power,  and  which  are  not  precluded  by  restric- 
tions and  exceptions  specified  in  the  constitution, 
or  not  immoral,  or  not  contrary  to  the  essential 
ends  of  political  society."* 

Hamilton  regarded  a  strong  central  govern- 
ment as  the  surest  protection  against  monarchy. 
The  tendency  towards  disunion,  encouraged  by 

a  Lodge,  H.  C.,  Alexander  Hamilton,  p.  106. 
b  Works,  vol.  3,  p.  446.     On  the  Constitutionality  of  the  Bank, 
February  23,  1791. 

[57] 


ALEXANDER  HAMILTON 


the  French  revolutionary  ideas,  was  a  greater 
danger  than  the  establishment  of  a  royal  house. 
And  if  the  excesses  and  abuses  of  liberty  were  not 
checked,  by  strong  authority,  the  people  might  be 
forced  to  seek  shelter  from  their  own  violence  in 
arbitrary  rule.  "If  we  incline  too  much  to  democ- 
racy," he  said,  "we  shall  soon  shoot  into  a  mon- 
archy."* "Transition  from  demagogues  to 
despots,"  he  writes  in  another  place,  "is  neither 
difficult  nor  uncommon."15 

Because  of  the  prevalence  of  anarchy  and  dis- 
union in  America  in  his  day,  Hamilton  had  doubts 
whether  the  republican  form  of  government  was 
"consistent  with  that  stability  and  order  in  gov- 
ernment which  are  essential  to  public  strength  and 
private  security  and  happiness,"0  but  he  believed 
in  the  theory  and  hoped  for  its  success.  "I  am," 
he  writes,  "affectionately  attached  to  the  republi- 
can theory.  I  desire  above  all  things  to  see  the 
equality  of  political  rights,  exclusive  of  all  heredi- 
tary distinction,  firmly  established  by  a  practical 
demonstration  of  its  being  consistent  with  the 
order  and  happiness  of  society."3  "The  fabric  of 
American  Empire,"  he  says  in  another  place, 
"ought  to  rest  on  the  solid  basis  of  the  consent  of 

a  Works,  vol.  1,  p.  411.     Federal  Convention,  1787. 

b  Works,  vol.  2,  p.  141.    Letter  of  H.  G.,  February  24,  1789. 

c  Works,  vol.  9,  p.  534.    To  Carrington,  May  26,  1792. 

d  Works,  vol.  9,  p.  533.    To  Carrington,  May  26,  1792. 

[58] 


AUTHORITY 


the  people.  The  streams  of  national  power  ought 
to  flow  immediately  from  that  pure,  original 
fountain  of  all  legitimate  authority."*  Since,  how- 
ever, in  a  republican  government  the  legislative 
power  predominates,  he  wished  it  to  be  so  divided 
that  it  would  give  expression  to  the  desires  of  both 
the  contented  and  progressive  classes  in  the  com- 
munity.15 By  playing  the  forces  of  stability  and 
unrest  against  each  other,  he  expected  to  steer  the 
union  safely  between  the  two  dangerous  rocks  of 
government:  despotism  on  the  one  hand,  and 
anarchy  on  the  other. 

The  first  serious  attack  on  the  authority  of  the 
Union  was  the  Whiskey  Rebellion  in  Western 
Pennsylvania  in  1794.  Hamilton  had  a  great  deal 
to  say  on  the  rebellion.0  He  realized  that  if  a 
section  of  the  country  had  a  right  to  nullify  a 
federal  tax  on  whiskey  or  any  other  law,  the  new 
Constitution  was  as  much  a  sham  as  the  Articles 
of  Confederation.  The  militia  was  called  out  and 
the  rebellion  melted  away.  The  vindication  of  the 
authority  of  the  central  government  quieted  for 
the  moment  the  faction  of  anarchy  and  disunion, 
but  the  principle  of  nullification  appeared  again  in 
a  few  years  later  in  the  Kentucky  Resolutions, 
drafted  by  Jefferson.  In  them  it  was  declared  that 

a  Works,  vol.  11,  p.  180.    The  Federalist,  No.  22. 
b  Works,  vol.  12,  p.  45.    The  Federalist,  No.  51. 
c  Works,  vol.  6,  pp.  339-460. 

[59] 


ALEXANDER  HAMILTON 


the  state  had  a  right  to  judge  for  itself  to  what 
extent  Federal  laws  should  be  supreme  within  its 
borders.  Virginia  followed  Kentucky  in  issuing 
similar  resolutions.  The  tendency  of  the  doctrines 
advanced  by  Virginia  and  Kentucky,  Hamilton 
believed  to  be  "to  destroy  the  Constitution  of  the 
United  States."4  These  resolutions,  like  the 
Whiskey  Rebellion,  were  symptoms  of  the  opposi- 
tion to  central  power  and  national  interests. 
Government  had  been  so  long  a  makeshift  for 
popular  whims  that  institutions  and  authority  had 
lost  all  their  sacredness. 

The  French  Revolution  began  in  the  same  year 
that  our  new  government  was  put  in  operation. 
French  ideas,  expressing  a  hatred  for  all  existing 
forms  of  society,  spread  to  America,  and  formed 
an  alliance  with  the  tendency  toward  disunion. 
"Since  the  peace,"  Hamilton  said  in  1796,  "every 
careful  observer  has  been  convinced  that  the  policy 
of  the  French  Government  has  been  adverse  to 
our  acquiring  internally  the  consistency  of  which 
we  were  capable — in  other  words,  a  well-consti- 
tuted and  efficient  government."15  Intrigue  of 
French  agents  and  ministers  had  undermined  the 
faith  of  the  people  in  their  government.  Hamil- 
ton hated  French  influence  and  the  revolutionary 

a  Works,  vol.  10,  p.  340.    To  Sedgwick,  February  2,  1799. 
b  Works,  vol.  6,  p.  209.     France,  1796. 

[60] 


AUTHORITY 


ideas  of  Natural  Rights  because  they  were  anti- 
national. 

It  was  the  excesses  of  revolution  which  Hamil- 
ton opposed.  "A  struggle  for  liberty,"  he  says, 
"is  in  itself  respectable  and  glorious;  when  con- 
ducted with  magnanimity,  justice,  and  humanity, 
it  ought  to  command  the  admiration  of  every 
friend  to  human  nature;  but  if  sullied  by  crimes 
and  extravagances,  it  loses  its  respectability."* 
While  being  deeply  concerned  with  the  security  of 
property,  he  did  not  regard  it  as  sacred.  "When- 
ever a  right  of  property,"  he  declared,  "is  in- 
fringed for  the  general  good  if  the  nature  of  the 
case  admits  of  compensation,  it  ought  to  be  made; 
but  if  compensation  be  impracticable,  that  imprac- 
ticability ought  not  to  be  an  obstacle  to  a  clearly 
essential  reform. "b  To  Hamilton,  as  to  Burke, 
however,  revolution  was  generally  anathema. 
These  contemporaries  were  both  unsparing  in  their 
denunciation  of  the  French  upheaval  of  '89.  They 
could  not  understand  how  conditions  might  become 
so  bad  that  a  root  and  branch  revolution  was  the 
only  way  out.  "A  disposition  to  preserve,  and  an 
ability  to  improve,  taken  together,"  Burke  writes, 
"would  be  my  standard  of  a  statesman."0  They 
confounded  democracy  and  the  rule  of  the  people 

a  Works,  vol.  4,  p.  386.     To  Washington,  April,  1793. 

b  Works,  vol.  3,  p.  16.     Funding  System,  1791    (?). 

c  Burke,  E.,  Reflections  on  the  Revolution  in  France,  part  1. 

[61] 


ALEXANDER  HAMILTON 


with  the  violence  and  anarchy  of  the  French  Revo- 
lution. In  the  words  of  Burke  they  believed  that 
uan  absolute  democracy  no  more  than  absolute 
monarchy  is  to  be  reckoned  among  the  legitimate 
forms  of  government. "a  They  had  faith  neither 
in  the  theory,  uThe  people  can  do  no  wrong,"  nor 
the  theory,  "The  king  can  do  no  wrong."  To  them 
neither  kings  nor  people  were  infallible.  Hamil- 
ton never  fawned  before  the  multitude  nor  tried  to 
ride  their  prejudices  to  success.  His  idea  of  states- 
manship was  leadership.  "When  occasions  present 
themselves,"  he  says,  "in  which  the  interests  of  the 
people  are  at  variance  with  their  inclinations,  it  is 
the  duty  of  the  persons  whom  they  have  appointed 
to  be  the  guardian  of  those  interests,  to  withstand 
the  temporary  delusion  in  order  to  give  them  time 
and  opportunity  for  more  cool  and  sedate  reflec- 
tion. Instances  might  be  cited  in  which  a  conduct 
of  this  kind  has  saved  the  people  from  very  fatal 
consequences  of  their  own  mistakes,  and  has  pro- 
cured lasting  monuments  of  their  gratitude  to  the 
men  who  had  courage  and  magnanimity  enough  to 
serve  them  at  the  peril  of  their  displeasure."1 

Hamilton's  respect  for  authority  is  in  accord 
with  his  nationalistic  creed.  Government  he  re- 
garded as  something  apart  from  the  nation;  its 
clothing,  as  it  were.  "I  hold  with  Montesquieu," 

a  Burke,  E.,  Reflections  on  the  Revolution  in  France,  part  1. 
b  Works,  vol.  12,  p.  207.    The  Federalist,  No.  71. 

[62] 


AUTHORITY 


he  writes,  "that  a  government  must  be  fitted  to  a 
nation  as  much  as  a  coat  to  the  individual;  and, 
consequently,  that  what  may  be  good  at  Philadel- 
phia may  be  bad  at  Paris,  and  ridiculous  at  Peters- 
burgh."a  To  him  government  was  the  means, 
never  the  end, — the  means  by  which  the  will  of  the 
nation  was  made  effective.  If  the  national  inter- 
ests demanded  measures  of  defence  or  diplomacy; 
the  revival  of  credit  or  the  founding  of  a  bank;  the 
encouragement  of  one  class  or  the  restraint  of 
another,  he  believed  that  the  government  should 
be  strong  enough  to  enforce  these  measures. 

In  an  age  when  traditions  were  scoffed  at  and 
institutions  were  crumbling,  Hamilton  opposed 
the  tide  of  irresponsible  democracy  and  laid  secure 
the  foundations  of  our  political  faith;  he  gathered 
up  the  achievements  of  the  past  and  embodied 
them  in  a  strong  political  structure  which  became 
the  secure  soil  in  which  American  democracy  cast 
its  roots. 

a  Works,  vol.  10,  p.  337.    To  Lafayette,  January  6,  1799. 


[63] 


CHAPTER  SIXTH 

FINANCE  AND  UNITY 

The  financial  measures  of  Alexander  Hamil- 
ton had  three  great  purposes:  first,  to  establish 
national  credit  both  at  home  and  in  Europe; 
secondly,  to  provide  financial  machinery  adequate 
to  the  business  needs  of  the  nation;  thirdly,  to 
cement  more  closely  the  union  of  the  States.  His 
aims  were  not  merely  financial;  they  were  national. 
The  financial  problems  did  not  appeal  to  him  as 
so  many  difficult  problems  in  themselves  to  find 
answers  for;  but  as  opportunities  by  which  he 
might  achieve  his  most  cherished  dream — the 
building  of  a  great  American  nation. 

Hamilton  became  Secretary  of  the  Treasury 
under  Washington  on  the  eleventh  day  of  Sep- 
tember, 1789.  The  finances  of  the  country  were 
a  total  wreck;  and,  what  was  far  more  serious,  the 
spirit  of  repudiation  and  dishonesty,  which  had 
characterized  our  former  history,  was  abroad 
among  the  people.  After  the  paper  money  de- 
bauches of  the  colonial  and  Revolutionary 
periods;  after  the  sequestration  and  confiscation 
of  foreign  debts;  after  the  stop  and  legal 
tender  laws  and  wholesale  repudiation;  after  the 
attacks  on  the  courts  of  law  for  the  enforcement 
of  lawful  contracts;  after  the  dishonesty,  specula- 

[64] 


FINANCE  AND  UNITY 


tion,  and  depreciation  of  our  early  history,  the 
wonder  is  that  Hamilton  ever  overcame  public 
prejudice  against  honest  and  business-like  methods 
in  finance.  The  fathers  had  eaten  sour  grapes  and 
the  children's  teeth  were  set  on  edge. 

The  office  of  Secretary  of  the  Treasury  was, 
from  the  nature  of  the  financial  problems  con- 
fronting the  government,  the  most  difficult  in 
Washington's  cabinet.  Hamilton  entered  it  with 
practically  no  experience  as  a  financier.  He  had 
been  a  clerk  for  a  merchant  in  St.  Croix,  Wash- 
ington's private  secretary,  a  writer  of  pamphlets, 
and  a  champion  of  the  new  Constitution;  but  he 
had  never  faced  the  complicated  problems  of 
finance.  It  is  true,  that  in  1780  and  1781  he  had 
written  remarkable  letters  to  Robert  Morris  con- 
cerning a  national  bank.  In  these  letters  he  had 
shown,  not  only  a  wide  knowledge  of  finance,  but 
also  a  grasp  of  the  nation's  needs.  It  is  by  intro- 
ducing order  into  our  finances — by  restoring 
public  credit, — he  said,  not  by  gaining  battles,  that 
we  are  finally  to  gain  our  independence.11  He 
urges  the  establishment  of  a  National  Bank  and 
proper  provisions  for,  the  debt  of  the  country. 
But  while  these  letters  to  Morris  show  that  Ham- 
ilton, even  when  he  was  in  the  army,  was  thinking 
on  matters  of  financial  organization,  they  hardly 
lead  us  to  expect  the  brilliant  measures  which  he 

a  Works,  vol.  3,  p.  343.    To  R.  Morris,  April  30,  1781. 
[65] 


ALEXANDER  HAMILTON 


launched  ten  years  later.  His  work  seems  to  be 
that  of  a  constructive  genius  to  whom  the  book  of 
financial  mysteries  was  open,  and,  as  he  ran,  he 
read. 

We  must  beware  of  exaggerating,  however, 
Hamilton's  originality  in  public  finance.  His 
dreaming  was  not  of  the  sort  that  works  out 
untried  schemes  in  the  closet  and  then  experi- 
ments with  them  on  the  people.  When  suddenly 
called  upon  to  create  a  financial  organization  for 
the  new  government,  he  looked  over  the  world  to 
see  whether  some  system  was  not  already  working 
which  would  lend  some  suggestions  for  solving  the 
American  problems.  "It  is  a  strong  proof  of  the 
sobriety  of  Hamilton's  judgment,"  Dunbar  says, 
"that  in  determining  his  course  under  these  cir- 
cumstances, he  sought  for  the  most  part  to  adapt 
to  his  purpose  methods  and  agencies  which  had 
been  tested  by  experience;  for  that  is  the  great 
characteristic  of  his  Reports  on  Public  Credit  and 
on  a  .  National  Bank."a  Naturally,  England 
offered  Hamilton  the  most  fertile  field  for  pre- 
cedents. He  believed,  no  doubt,  that  financial 
measures  that  were  successfully  put  in  operation 
by  one  branch  of  the  Anglo-Saxon  race  would  work 
successfully  when  applied  to  another.  In  funding 
the  debt  he  followed  the  principles  of  the  English 

a  Dunbar,    C.    F.,    Some    Precedents    followed    by    Hamilton. 
Qu.  Jo.  of  Econ.  (1888-1889),  vol.  3,  p.  35. 

[66] 


FINANCE  AND  UNITY 


system.  He  thought  that  the  proper  funding  of 
the  debt  in  England  had  stimulated  the  growth  of 
industry,  and  he  desired  the  same  results  for 
the  American  nation.a  At  the  close  of  his  pro- 
posals for  funding  in  his  first  Report  on  Public 
Credit  he  remarks:  "The  chief  outlines  of  the 
plan  are  not  original;  but  it  is  no  ill  recommenda- 
tion of  it,  that  it  has  been  tried  with  success. "b  In 
his  plan  for  a  bank  Hamilton  followed  the  main 
ideas  of  the  charter  of  the  Bank  of  England.  His 
bank,  like  its  English  counterpart,  was  a  syndicate 
of  holders  of  public  debt  who  were  incorporated 
and  granted  a  monopoly  of  issuing  notes.0  In  the 
"Wealth  of  Nations"  he  also  found  practical  sug- 
gestions for  his  plans  for  a  bank.d  If  these  ex- 
amples of  precedents  followed  by  Hamilton  lessen 
his  claim  to  originality  in  finance,  they  show,  all 
the  more,  his  greatness  as  a  constructive  states- 
man. 

Hamilton  had  no  choice  as  to  which  of  the 
financial  problems  he  should  grapple  with  first. 
Before  there  could  be  any  public  credit,  adequate 
provision  had  to  be  made  for  funding  the  unde- 
fined mass  of  government  securities.  During  the 
struggle  for  independence  both  the  central  and 

a  Works,  vol.  4,  pp.  123,  124.    Report  on  Manufactures,  1791. 
b  Works,  vol.  2,  p.  276.    Public  Credit,  1790. 
c  Sumner,  W.  G.,  Alexander  Hamilton,  p.  164.  Works,  vol.  3, 
p.  439. 

d  Works,  vol.  2,  pp.  449,  450.    Objections  and  Answers,  1792. 

[67] 


ALEXANDER  HAMILTON 


state  governments  had  contracted  debts.  These 
debts  were  the  price  of  liberty.11  When  possible, 
money  had  been  borrowed  in  foreign  markets. 
Foreign  debts  in  1790  amounted  to  $10,070,307, 
on  which  the  arrears  of  interest  were  $1,640,- 
O7i.62.b  The  unbusiness-like  way  in  which  we 
had  managed  this  debt  had  made  us  ridiculous  in 
the  eyes  of  European  financiers.  There  was  also  a 
domestic  debt  of  $27,383,917.74,  with  an  arrears 
of  interest  amounting  to  $13,030,168.20.°  This 
debt  was  a  disorganized  mass  of  securities,  issued 
at  different  times  in  the  name  of  the  Continental 
Congress,  to  pay  for  supplies  and  services.  It 
had  depreciated  in  value  and  many  of  the  original 
holders  had  sold  their  contract  rights  to  specu- 
lators for  sums  much  less  than  the  face  of  the 
securities.  In  addition  to  the  foreign  and  domes- 
tic debts  there  were  the  State  debts.  These  were 
of  uncertain  amount.  Hamilton  estimated  that 
the  principal  and  interest  would  amount  to  about 
twenty-five  millions  of  dollars.*  The  whole  debt, 
then,  amounted  to  a  little  over  seventy-five  mil- 
lions of  dollars.6  To  the  people  of  that  time  this 
seemed  like  an  enormous  debt.  When  Hamilton 

a  Works,  vol.  2,  p.  231.    Public  Credit,  1790. 
b  Works,  vol.  2,  p.  254.    Public  Credit,  1790. 
c  Works,  vol.  2,  p.  254.    Public  Credit,  1790. 
d  Works,  vol.  2,  p.  255. 

eln   1795    Hamilton   reported  the   whole   funded   debt  to   be 
$76,096,468.67.    Works,  vol.  3,  p.  231. 

[68] 


FINANCE  AND  UNITY 


came  to  office,  the  creditors  were  clamoring  for 
payment  and  the  treasury  of  the  government  was 
empty.  He  proposed  to  fund  the  whole  debt — to 
exchange  all  securities  by  whomsoever  held,  for 
new  government  bonds. 

During  the  recess  of  the  First  Congress,  Ham- 
ilton applied  himself  uto  the  consideration  of  a 
proper  plan  for  the  support  of  public  credit,"  and 
on  the  I4th  of  January,  1790,  communicated 
to  the  House  his  First  Report  on  Public  Credit.a 
"It  is  agreed,  on  all  hands,"  he  says,  "that  that 
part  of  the  debt  which  has  been  contracted  abroad, 
and  is  denominated  the  foreign  debt,  ought  to  be 
provided  for  according  to  the  precise  terms  of  the 
contracts  relating  to  it."b  But  there  was  not,  he 
noted,  the  same  unanimity  of  opinion  in  regard  to 
the  provision  for  the  domestic  debt.  The  most 
popular  scheme  for  providing  for  it  was  to  dis- 
criminate in  funding  between  the  original  holders 
of  public  securities  and  present  possessors  by  pur- 
chase, i.e.,  to  fund  the  securities  held  by  original 
creditors  at  face  value  but  those  held  by  purchase 
at  what  the  possessors  paid  for  them.  This  sugar- 
coated  plan  of  repudiation  was,  at  first  sight,  very 
plausible.  Hamilton,  however,  having  considered 
it,  rejected  it.  He  argued  that  when  the  govern- 
ment had  borrowed  the  money,  it  had  entered 

a  Works,  vol.  2,  pp.  227-289. 
b  Works,  vol.  2,  p.  236. 

[69] 


ALEXANDER  HAMILTON 


into  a  contract  with  the  creditors  to  pay  them  or 
their  assignees  the  face  value  of  the  securities  with 
interest  and  that  by  making  the  securities  assign- 
able, the  government  had  enabled  the  holder  to 
sell  them,  if  he  chose,  in  the  market;  and  if,  be- 
cause of  his  lack  of  faith  and  confidence  in  the 
government,  he  had  sold  them,  he  had  nothing  to 
blame  but  his  distrust  and  lack  of  foresight.  The 
government  had  the  same  contract  with  the  buyer 
that  it  had  with  the  original  holder.  To  disregard 
it  was  a  manifest  injustice  and  prejudicial  to  the 
public  credit.  "The  buyer  paid,"  Hamilton  said, 
"what  the  commodity  was  worth  in  the  market, 
and  took  the  risks  of  reimbursement  upon  himself. 
He,  of  course,  gave  a  fair  equivalent,  and  ought  to 
reap  the  benefit  of  his  hazard — a  hazard  which 
was  far  from  inconsiderable,  and  which,  perhaps, 
turned  on  little  less  than  a  revolution  in  govern- 
ment."4 

Hamilton's  unprecedented  advocacy  of  the 
assumption  of  the  State  debts  shows  clearly  the 
national  purpose  which  underlay  all  his  measures. 
In  this,  he  went  out  of  his  way  to  get  a  policy,  the 
chief  result  of  which  would  be,  not  to  create  credit, 
but  to  cement  the  Union  together.  He  saw  in  the 
assumption  of  the  State  debts  an  opportunity  to 
strengthen  the  nation  at  the  expense  of  local 
prejudice. 

a  Works,  vol.  2,  p.  238.    Public  Credit,  1790. 
[70] 


FINANCE  AND  UNITY 


Some  of  Hamilton's  reasons  for  assumption  of 
the  State  debts  are  stated  in  the  First  Report  on 
Public  Credit.  It  would,  he  said,  contribute  to 
the  stability  of  national  finance,  prevent  compe- 
tition among  the  States  for  resources,  and  insure 
to  the  revenue  laws  a  more  ready  and  satisfactory 
execution/  In  a  later  unfinished  paper  he  made 
an  able  and  elaborate  defence  of  the  funding  sys- 
tem.13 He  defended  the  assumption  of  the  State 
debts  for  the  following  reasons:  because  superior 
justice  was  done  in  relieving  the  overburdened 
states  and  in  equalizing  the  contributions  of  all  the 
citizens;  because  it  avoided  "collisions,  heart- 
burnings, and  bickerings"  among  the  different 
systems  of  the  state  finance;  because  it  secured  the 
Union  a  full  and  complete  command  of  the 
resources  of  the  nation;  because  it  consolidated 
and  secured  public  credit;  because  it  made  a  more 
adequate  provision  for  the  entire  debt  of  the 
country;  because  it  rescued  the  national  character 
from  stain  abroad,  since  foreigners  would  not  dis- 
tinguish between  infractions  of  credit  by  the  State 
and  by  the  general  government;  because  it  pre- 
vented instability  in  funds  by  placing  them  on  the 
same  foundation;  because  it  facilitated  a  speedy 
and  honorable  extinguishment  of  the  debt;  be- 
cause it  prevented  the  depopulation  of  the  over- 

*  Works,  vol.  3,  pp.  244-248. 

b  Works,  vol.  8,  p.  429  to  vol.  9,  p.  34  (1795?). 

[71] 


ALEXANDER  HAMILTON 


burdened  states  and  the  too  rapid  transfer  of 
population  to  the  unsettled  parts  of  the  country; 
and  finally  because  it  strengthened  the  central 
government.*  Even  for  the  sake  of  popularity 
alone  Hamilton  thought  a  failure  to  assume  the 
State  debts  would  have  reacted  fatally  on  the 
government.  "A  weak  and  embarrassed  govern- 
ment," he  observes,  "never  fails  to  be  unpopular. 
It  attaches  to  itself  the  disrespect  incident  to  weak- 
ness, and,  unable  to  promote  the  public  happiness, 
its  impotencies  are  its  crimes.  Without  the  as- 
sumption, the  government  would  have  been  for  a 
long  time  at  least  under  all  the  entanglements  and 
imbecilities  of  a  complicated,  clashing,  and  dis- 
ordered system  of  finance. "b 

We  have  seen  that  throughout  Hamilton's 
measures  for  funding  the  foreign,  domestic,  and 
State  debts  there  runs  the  constant  purpose  not 
merely  of  establishing  the  credit  of  the  new  gov- 
ernment, but  also  of  cementing  the  union  of  States 
and  invigorating  the  business  of  the  nation.  This 
purpose  appears  also  in  the  report  on  a  National 
Bank,  submitted  to  Congress  the  I4th  day  of 
December,  1790.° 

Hamilton  understood  the  manner  in  which 
banks  hypothecate  or  pledge  for  security  the 

a  Works,  vol.  9,  pp.  14-28.     Funding  System,  1795   (?). 
b  Works,  vol.  9,  p.  31.    Funding  System,  1795  (?). 
c  Works,  vol.  3,  pp.  388-443. 

[72] 


FINANCE  AND  UNITY 


wealth  of  the  community;  and  make  available  for 
business,  through  notes  and  deposit  rights,  this 
wealth.  He  said  they  augmented  uthe  active  and 
productive  capital  of  a  country."  uGold  and 
silver,"  he  continues,  "when  they  are  employed 
merely  as  the  instruments  of  exchange  and  aliena- 
tion, have  not  been  improperly  denominated  dead 
stock ;  but,  when  deposited  in  banks,  to  become  the 
basis  of  a  paper  circulation,  which  takes  their 
character  and  place,  as  the  signs  or  representa- 
tives of  value,  they  then  acquire  life,  or,  in  other 
words,  an  active  and  productive  quality."8-  He 
saw  clearly  the  value  of  an  asset  currency  in  con- 
trast with  the  dangers  of  a  government  issue  of 
paper  money.b  The  business  of  the  country,  he 
argued,  which  had  been  discouraged  because  the 
circulating  medium  was  deficient,  would  be  stimu- 
lated by  banks,  which  would  not  only  make  vast 
amounts  of  hoarded  money  available  but  also 
transform  the  "passive"  wealth  of  the  nation  into 
active  credit.  By  banks  he  would  keep  the  money 
of  the  country  incessantly  active  so  that  men  of 
business  ability  would  be  able  to  borrow  on  credit, 
and  by  this  juncture  of  ability  and  capital,  the 
resources  of  the  country  would  be  more  quickly 
developed,  land  would  become  more  valuable, 
agriculture  more  prosperous,  commerce  more 

a  Works,  vol.  3,  p.  390.    National  Bank,  1790. 
b  Works,  vol.  3,  p.  414. 

[73] 


ALEXANDER  HAMILTON 


active,  and  men  more  enterprising.  "By  con- 
tributing to  enlarge,"  Hamilton  says,  uthe  mass  of 
industrious  and  commercial  enterprise,  banks  be- 
come nurseries  of  national  wealth."* 

By  means  of  a  central  bank  Hamilton  hoped  to 
develop  the  national  aspect  of  business.  The 
notes  of  the  bank,  when  established,  would  be 
good  all  over  the  country.  Drafts  would  liquidate 
commercial  claims  between  men  of  different  sec- 
tions and  prevent  the  delay,  expense,  and  risk 
incident  to  remittance  of  coin.b  Not  the  least  use 
of  banks  would  be  to  teach  the  people  business 
methods.  It  would  teach  punctuality,  and  en- 
courage frugality  and  honesty.  It  would  increase 
confidence,  and  the  people,  supported  by  a  reliable 
institution,  would  be  more  willing  to  venture.  The 
enterprise  of  men  would  be  stimulated  and  the 
wealth  of  the  nation  made  socially  effective. 

The  First  National  Bank  was  also  intended  to 
be  useful  in  the  public  service.  Hamilton's  con- 
ception of  the  relation  of  the  bank  to  the  govern- 
ment was  the  same  relation  which  the  Bank  of 
England  held  to  the  British  government.  It  was 
to  be  a  private  institution  run  for  the  public  good. 
"Public  utility,"  Hamilton  says,  "is  more  truly  the 
object  of  public  banks  than  private  profit.  And 
it  is  the  business  of  government  to  constitute 

a  Works,  vol.  3,  p.  393.     National  Bank,  1790. 
b  Works,  vol.  3,  p.  395.     National  Bank,  1790. 

[74] 


FINANCE  AND  UNITY 


them  on  such  principles  that,  while  the  latter  will 
result  in  a  sufficient  degree  to  afford  competent 
motives  to  engage  in  them,  the  former  be  not 
made  subservient  to  it."a  There  was  an  intimate 
connection  of  interest,  he  thought,  between 
government  and  the  bank  of  the  nation.  In 
sudden  emergencies  it  would  assist  the  govern- 
ment in  getting  pecuniary  aid  and  the  mass  of  its 
capital  and  credit  could  readily  be  converted  to 
the  national  use. 

Hamilton's  recommendations  concerning  money, 
which  he  embodied  in  his  Report  on  the  Mint,b 
had  two  purposes.  In  the  first  place,  he  sought  to 
establish  a  sound  monetary  system  which  would 
form  an  adequate  support  for  the  country's  credit 
system,  for,  if  the  money  were  debased  and  de- 
preciating, the  very  floor  on  which  the  busi- 
ness of  the  nation  stood  would  be  uncertain.  In 
the  second  place,  uniform  coinage  was  as  neces- 
sary for  the  unity  of  the  nation  as  a  national  credit 
organization.  In  order  that  the  national  aspect 
of  business  might  develop,  it  was  imperative  that 
the  money  unit  should  be  the  same  in  every  state. 

In  Hamilton's  day  we  were  sorely  in  need  of 
foreign  capital.  We  needed  it  to  improve  com- 
merce, agriculture,  and  manufactures ;  to  construct 
canals  and  roads  and  to  work  up  our  "im- 

a  Works,  vol.  3,  p.  419.     National  Bank,  1790. 
b  Works,  vol.  4,  pp.  3-63.    January  28,  1791. 

[75] 


ALEXANDER  HAMILTON 


provable  matter  in  a  crude  state."  We  could 
well  afford  to  pay  foreigners  interest  for  capital 
which,  when  applied  to  the  productive  resources 
of  the  nation,  would  yield  large  profits.  "If  the 
United  States,"  Hamilton  remarks  in  his  second 
Report  on  Public  Credit,*  "observe,  with  delicate 
caution,  the  maxims  of  credit,  as  well  toward 
foreigners  as  their  own  citizens,  in  connection  with 
the  general  principles  of  an  upright,  stable,  and 
systematic  administration,  the  strong  attractions 
which  they  present  to  foreign  capital  will  be  likely 
to  insure  them  the  command  of  as  much  as  they 
may  want,  in  addition  to  their  own,  for  every 
species  of  internal  amelioration. "b  He  sought 
also  to  improve  our  credit  abroad  in  order  to 
strengthen  the  nation  in  time  of  war.  "There  can 
be  no  time,  no  state  of  things,"  he  says,  "in  which 
credit  is  not  essential  to  a  nation,  especially  as 
long  as  nations  in  general  continue  to  use  it  as  a 
resource  in  war."c 

As  important  as  foreign  credit  was,  Hamilton 
regarded  domestic  credit  as  of  more  importance. 
"The  opinion,"  he  wrote  to  Wolcott,  "which  some 
entertain  is  altogether  a  false  one — that  it  is  more 
important  to  maintain  our  credit  abroad  than  at 
home.  The  latter  is  far  the  most  important 

a  Works,  vol.  3,  pp.  199-301.    January  16,  1795. 
b  Works,  vol.  3,  p.  298.    Public  Credit,  1795. 
c  Works,  vol.  3,  p.  295.    Public  Credit,  1795. 

[76] 


FINANCE  AND  UNITY 


nursery  of  resources,  and,  consequently,  far  the 
most  important  to  be  inviolably  maintained."* 
Credit  is  the  invigorating  principle  of  the  nation; 
it  brings  into  action  its  capacities  for  improve- 
ment and  accelerates  growth.b  Its  protection 
Hamilton  regarded  as  of  interest,  not  to  any  one 
class  or  section,  but  to  the  whole  people.  "The 
cause  of  credit  and  property,"  he  says,  uis  one  and 
the  same  throughout  the  States.  A  blow  to  it,  in 
whatever  State  or  in  whatever  form,  is  a  blow 

to  it  in  every  State  and  in  every  form There 

cannot  be  a  violation  of  public  principle  in  any 
State  without  spreading  more  or  less  an  evil  con- 
tagion in  all."c 

It  was  Hamilton's  idea  that  his  financial  meas- 
ures acted  directly  on  the  prosperity  of  the  nation 
by  reviving  credit,  facilitating  the  exchanges,  im- 
proving the  machinery  of  business,  and  en- 
couraging industrious  and  ambitious  undertakers. 
While  an  obvious  object  of  his  measures  was 
strengthening  the  borrowing  power  of  the  govern- 
ment, his  broad  purpose  was  the  improving  of 
commerce,  agriculture,  and  manufactures;  the  ex- 
tension of  trade  and  navigation;  the  encourage- 
ment of  the  building  of  towns  and  of  means  of 
transportation.  He  believed  that  his  measures 

a  Works,  vol.  10,  p.  93.    To  Wolcott,  April  10,  1795. 

b  Works,  vol.  3,  p.  294.    Public  Credit,  1795. 

c  Works,  vol.  9,  pp.  16,  17.    Funding  System,  1795  (?). 

[77] 


ALEXANDER  HAMILTON 


had  resulted  in  a  "universal  vivification  of  the 
energies  of  industry."* 

Hamilton  thought  that  the  revival  of  pros- 
perity which  came  with  the  founding  of  the  new 
government,  was  partly  due  to  the  fact  that  fund- 
ing increased  the  "active  capital"  of  the  country. 
Writers  have  read  into  this  statement  the  modern 
definition  of  capital,  and  concluded  that  Hamilton 
was  confused  in  regard  to  money,  capital,  and 
debt.b  Hamilton  was  very  enthusiastic  over  the 
idea  that  a  well-funded  debt  increased,  as  he  said, 
the  active  capital,  and  his  zeal  led  him  in  several 
cases  to  make  statements  suspiciously  near 
fallacies.0  But  he  meant  by  "active  capital"  cir- 
culating medium,  and  in  general,  he  saw  the  limi- 
tations as  well  as  the  value  of  funded  debt. 

"The  true  definition  of  public  debt,"  Hamilton 
observes,  "is  a  property  subsisting  in  the  faith  of 
the  government.  Its  essence  is  promise."1  Prop- 
erty rights,  which  were  in  abeyance,  because  a 
faithless  government  had  not  kept  its  promises, 
were,  by  proper  funding,  revived.  Confidence  in 
the  stability  and  solvency  of  the  new  government 
gave  the  securities  value.  No  real  wealth  was 
created,  but  individuals  received  promises-to-pay 

a  Works,  vol.  8,  p.  458.    Funding  System,  1795  (?). 
bSumner,  W.  G.,  Alexander  Hamilton,  p.  150. 
c  Cf.  Works,  vol.  2,  p.  452;  vol.  4,  p.  118  et  seq.;  vol.  8,  p.  460. 
d  Works,  vol.  3,  p.  284.    Public  Credit,  1795. 

[78] 


FINANCE  AND  UNITY 


from  the  government  which  had  exchangeable 
value.  These  exchangeable  securities,  which  are 
claims  on  the  wealth  of  the  community  in  the  same 
sense  that  a  bank  note  is  a  claim  on  the  assets  of 
a  bank,  served,  Hamilton  thought,  in  a  community 
where  specie  was  scarce,  as  a  circulating  medium. 
To  be  certain  that  the  funded  debt  operates  as 
"active  capital,"  he  says  it  is  only  necessary  to  con- 
sider that  it  is  "property  which  can  almost  at  any 

moment  be  turned  into  money "     "Who 

doubts,"  he  asks,  "that  a  man  who  has  in  his  desk 
$10,000  in  good  bank  notes,  has  that  sum  of 
active  capital  ?  .  .  .  .  Who  can  doubt  any  more  that 
the  possessor  of  $10,000  of  funded  stock  .  .  .  . 
is  equally  possessor  of  so  much  active  capital?"4 
By  "active  capital,"  then,  Hamilton  meant  not 
material  goods  only,  but  anything,  be  it  bank 
credit  or  notes,  gold  or  silver,  or  funded  debt, 
which  would  serve  as  an  "engine  of  business." 
The  readily  convertible  character  of  good  public 
securities  he  thought  gave  them  in  exchange  the 
value  of  bank  paper,  redeemable  on  demand.  He 
probably  overestimated  the  utility  of  exchange- 
able securities  as  circulating  medium.  There  was, 
however,  no  fallacy  in  his  assumption.  The  gov- 
ernment, let  us  suppose,  receives  $100  in  gold 
coin,  for  which  it  issues  a  bond  bearing  the  market 
rate  of  interest.  The  coin,  on  the  one  hand,  is  put 

a  Works,  vol.  8,  pp.  459,  460.    Funding  System,  1795  (?). 
[79] 


ALEXANDER  HAMILTON 


back  into  circulation  through  the  payment  of  gov- 
ernment expense;  the  bond,  on  the  other  hand, 
may  pass  from  hand  to  hand  in  business  transac- 
tions, doing  the  same  work  in  the  community  as 
might  be  done  by  a  $100  bank  note.  There  is  no 
more  absolute  wealth  in  the  community  after  this 
process  than  before,  but  the  wealth  is  in  a  more 
usable  form.  The  exchangeable  property  has  been 
doubled.  "In  the  question  under  discussion," 
Hamilton  observes,  "it  is  important  to  distinguish 
between-  an  absolute  increase  of  capital,  or  an 
accession  of  real  wealth,  and  an  artificial  increase 
of  capital,  as  an  engine  of  business,  or  as  an 
instrument  of  industry  and  commerce.  In  the  first 
sense,  a  funded  debt  has  no  pretensions  to  being 
deemed  as  increase  of  capital;  in  the  last,  it  has 
pretensions  which  are  not  easy  to  be  controverted. 
Of  a  similar  nature  is  bank  credit;  and,  in  an 
inferior  degree,  every  species  of  private  credit."a 
Another  motive  back  of  all  Hamilton's  financial 
measures  was  "to  cement  more  closely  the  union 
of  the  States."b  He  aimed  to  break  down  the 
local  and  territorial  loyalties,  and  to  center  the 
interests  of  the  people  in  the  nation.  We  see  this 
motive  in  his  uniform  monetary  system,  in  his 
central  bank,  and  especially  in  his  plan  for  the 
assumption  of  the  State  debts.  It  was  his  purpose 

a  Works,  vol.  4,  p.  124.     Manufactures,  1791. 
b  Works,  vol.  2,  p.  232.    Public  Credit,  1790. 

[80] 


FINANCE  AND  UNITY 


by  assumption  to  remove  one  great  possible  cause 
of  quarrels  between  the  States.  The  States  with 
the  largest  debts  would  chafe  under  their  burden; 
and  if  any  one  failed  to  make  provision  for  the 
payment  of  its  debt,  its  poor  credit  would  react  on 
the  whole  nation.  The  national  government,  by 
taking  over  all  the  debts,  consolidated  the  national 
finances.  Assumption  also  bound  the  interests  of 
the  richer  and  more  influential  citizens  of  the 
States,  who  held  the  securities,  to  the  central 
government.  It  tended,  Hamilton  said,  "to 
strengthen  our  infant  government  by  increasing 
the  number  of  ligaments  between  the  government 
and  the  interests  of  individuals."4 

In  this  use  of  the  moneyed  men  in  particular, 
and  in  Hamilton's  financial  measures  generally, 
Rabbeno  thinks  that  he  has  evidence  in  favor  of 
the  socialistic  interpretation  of  history.  The 
Federal  party  was,  he  says,  composed  chiefly  of 
business  men  who  desired  a  strong  government  in 
view  of  their  commercial  interests.  To  these  were 
added  the  creditors  of  the  government  and  some 
local  landowners.13  These  made  up  the  rising  capi- 
talistic class.  The  opposite  party,  on  the  contrary, 
Rabbeno  says,  consisted  of  the  umass  of  the 
people,  agricultural,  democratic,  and  individual- 

a  Works,  vol.  9,  p.  28.    Funding  System,  1795   (?). 

b  Rabbeno,  U.,  Protezionismo  Americano,  Essay  3,  ch.  1,  sec.  3. 

[81] 


ALEXANDER  HAMILTON 


istic  in  tendency."*  Hamilton  was,  he  concludes, 
the  representative  of  the  former  class,  and  laid 
the  foundation  of  his  schemes  on  it  and  at  the 
expense  of  the  farmers  and  non-commercial  class. 
Hamilton,  therefore,  is  to  Rabbeno  the  "prophet 
of  American  capitalism";  a  man  who  took  his 
ideals  of  statesmanship  from  his  class;  a  leader, 
whose  intentions  were  good,  but  who  was  actually 
using  the  nation  to  strengthen  his  class.  While  it 
is  true  that  Hamilton  used  the  contented  and 
moneyed  classes  of  the  nation  to  strengthen  the 
new  government  in  a  time  when  revolution  and 
local  prejudice  threatened  it,  it  is  not  true  that 
Hamilton  found  his  impelling  motives  in  the  ideals 
of  any  particular  class.  He  was  not  concerned 
with  a  class,  but  with  a  nation.  If  he  thought  it 
necessary  to  use  a  class — be  it  commercial  or  non- 
commercial— in  order  to  accomplish  a  national 
purpose,  he  would  do  it;  but  his  goal  was  not  the 
supremacy  of  a  class  at  the  expense  of  the  nation; 
it  was  the  supremacy  of  the  nation  at  the  expense 
of  classes  or  individuals  within  the  nation. 

The  principle  which  divided  the  parties  in 
Hamilton's  day  was  not  socialistic  but  national- 
istic. There  was  no  struggle  between  classes  in  the 
socialistic  meaning  of  the  word;  there  was  a 
struggle  between  two  political  ideals.  The  funda- 
mental antagonism  between  Hamilton  and  Jeffer- 

a  Rabbeno,  U.,  Protezionismo  Americano,  Essay  3,  ch.  1,  sec.  3. 
[82] 


FINANCE  AND  UNITY 


son  was  not  the  antagonism  of  capital  and  labor, 
but  of  nation  and  State.  Rabbeno  speaks  of  the 
"social  law  which  makes  economic  phenomena 
the  substratum  and  the  foundation  of  political 
events. "a  But  Hamilton's  measures  are  political 
events  which  revolutionized  the  economics  of  the 
whole  society.  They  transferred  the  loyalties  of 
the  people  from  the  States  to  the  central  govern- 
ment. They  are  not  effects,  but  causes.  His 
measures  were  intended  to  strengthen  the  Union 
by  giving  the  contented  and  propertied  individuals 
an  opportunity  to  serve  it.  They  were  devices  for 
making  use  of  the  upper  classes.13  "My  opinion 
has  been  and  is,"  Hamilton  says  in  defending  the 
attachment  of  propertied  individuals  to  the  gov- 
ernment, "that  the  true  danger  to  our  prosperity 
is  not  the  overbearing  strength  of  the  Federal 
head  but  its  weakness  and  imbecility  for  preserv- 
ing the  Union  of  the  States  and  controlling  the 
eccentricities  of  State  ambition  and  the  explosion 
of  factious  passions.  And  a  measure  which  con- 
sistently with  the  Constitution  was  likely  to  have 
the  effect  of  strengthening  the  fabric  would  have 
recommended  itself  to  me  on  that  account."0  As 
to  Bismarck,  "the  use  of  a  dynasty  as  the  indis- 
pensable cement  to  hold  together  a  definite  por- 

&  Rabbeno,  U.,  Protezionismo  Americano,  Essay  3,  ch.  1,  sec.  3. 
b  Cf.  Oliver,  F.  S.,  Alexander  Hamilton,  p.  164. 
c  Works,  vol.  9,  p.  28.     Funding  System,  1795   (?). 

[83] 


ALEXANDER  HAMILTON 


tion  of  the  nation,"4  was  essential  to  the  final 
unity  of  the  German  Empire,  so  to  Hamilton  the 
funding  of  the  State  debts  and  the  Bank  were 
devices  for  weakening  local  loyalties  and  for  weld- 
ing the  States  into  a  harmonious  nation. 

A  debt,  Hamilton  believed,  had  a  valuable  psy- 
chological effect  on  a  nation.  "A  national  debt, 
if  it  is  not  excessive,"  he  said  in  1781,  "will  be  to 
us  a  national  blessing.  It  will  be  a  powerful 
cement  of  our  Union.  It  will  also  create  a  neces- 
sity for  keeping  up  taxation  to  a  degree  which, 
without  being  oppressive,  will  be  a  spur  to  in- 
dustry, remote  as  we  are  from  Europe,  and  shall 
be  from  danger.  It  were  otherwise  to  be  feared 
our  popular  maxims  would  incline  us  to  too  great 
parsimony  and  indulgence.  We  labor  less  now 
than  any  civilized  nation  of  Europe;  and  a  habit 
of  labor  in  the  people  is  as  essential  to  the  health 
and  vigor  of  their  minds  and  bodies,  as  it  is  con- 
ducive to  the  welfare  of  the  State. "b  In  this 
passage  we  have  Hamilton's  psychology  of  the 
debt.  The  American  people,  he  thought,  would 
work  together  with  the  same  enthusiasm  to  pay 
off  their  debt  as  they  had  fought  together  to  oust 
European  danger.  The  common  effort  to  pay  the 
debt  would  tend  both  to  overshadow  local  and 

a  Bismarck,  Gedanken  und  Erinnerungen,  ch.  13. 

b  Works,  vol.  3,  p.  387.    On  National  Bank  to  Morris. 

[84] 


FINANCE  AND  UNITY 


factional   differences,   to   stimulate   the   spirit  of 
enterprise,  and  to  weld  the  States  into  a  Nation. 

Alexander  Hamilton  was  great  as  a  financier, 
but  he  was  still  greater  as  a  nation-builder.  His 
financial  measures  were  intended  not  merely  to 
establish  the  credit  of  the  government;  but  to 
transform  the  whole  national  life;  to  weaken  local 
and  strengthen  central  authority;  to  nationalize 
business;  to  cement  the  Union  of  States;  and  to 
stimulate  the  ambition  and  enterprise  of  the 
people.  These  measures  were  a  part  of  his  plan 
for  making  a  great  cooperating  nation;  they  were 
the  financial  side  of  his  nationalism. 


[85] 


CHAPTER  SEVENTH 
DANGERS  OF  HOMOGENEOUS  EXPANSION 

It  has  become  quite  trite  to  discuss  the  political 
antagonism  which  existed  between  Hamilton  and 
Jefferson;  but  it  is  not  so  common  to  hear  their 
economic  creeds  compared.  Jefferson,  as  an 
individualist,  found  all  his  sympathies  with  agri- 
culture. It  appealed  to  him  both  because  he  was 
temperamentally  in  favor  of  country  life  and  be- 
cause it  was  popular  with  the  masses  of  the  people. 
"We  have  an  immensity  of  land,"  he  wrote  in 
1781,  "courting  the  industry  of  the  husbandman. 
Is  it  best  then  that  all  our  citizens  should  be  em- 
ployed in  its  improvement,  or  that  one  half  should 
be  called  off  from  that  to  exercise  manufactures 
and  handicraft  arts  for  the  other?  Those  who 
labor  in  the  earth  are  the  chosen  people  of  God. 
....  Corruption  of  morals  in  the  mass  of  culti- 
vators is  a  phenomenon  of  which  no  age  nor 

nation  has  furnished  an  example While  we 

have  land  to  labor  then,  let  us  never  wish  to  see 
our  citizens  occupied  at  the  workbench  or  twirling 

a  distaff Let   our  workshops  remain  in 

Europe The  mobs  of  great  cities  add  just 

so  much  to  the  support  of  pure  government,  as 
sores  do  to  the  strength  of  the  human  body."a 

a  Jefferson,  Th.,  Writings,  vol.  2,  pp.  229,  230.    Notes  on  Vir- 
ginia.    Written  1781.    Published  1784. 

[86] 


DANGERS  OF  EXPANSION 


Jefferson's  natural  inclination  toward  agriculture 
led  him  to  take  a  sympathetic  interest  in  the  French 
and  English  economists  who  elevated  the  agri- 
cultural systems  of  economics  above  all  others. 
He  was  familiar  with  the  writings  of  the  Physio- 
crats, Turgot  and  Smith.a  He  corresponded 
with  Dupont  de  Nemours  and  J.  B.  Say.  He,  of 
course,  did  not  fall  into  the  extreme  fallacies  of 
the  individualistic  school  but  his  prejudices  were 
all  that  way. 

Hamilton,  who  was  as  familiar  with  the  French 
theories  of  agriculture  and  the  writings  of  Adam 
Smith  as  Jefferson  was,  did  not  find  them  adapted 
to  his  purpose  of  diversifying  national  industry; 
and  this  alone  was  to  him  a  sufficient  reason  for 
rejecting  them.  They  might  be  true  relative  to 
certain  anti-national  desires  and  tendencies  but 
they  were  not  true  for  the  nationalist.  Hamilton 
was  seeking  a  philosophy  which  would  strengthen 
the  economic  life  of  the  American  nation. 

That  the  propensities  of  the  people  were  toward 
agriculture  was  no  argument  to  Hamilton  in  favor 
of  drifting  with  them.  He  stood  squarely  against 
any  let-alone  doctrine.  He  was  not  so  sure  that 
the  agriculturists  were  any  more  God's  chosen 
people  than  the  business  men  and  manufacturers, 
and,  any  way,  his  interest  was  not  in  the  par- 
ticular people,  but  in  their  civilization.  A  nation, 

&  Jefferson,  Th.,  Writings,  vol.  14,  p.  459. 
[87] 


ALEXANDER  HAMILTON 


he  believed,  was  richer  in  material  goods  and 
ideals  which  had  a  diversified  life;  which  had  the 
intellectual  and  social  life  found  only  in  cities;  and 
which  had  busy  marts  and  factories  as  well  as 
farms. 

The  economic  creeds  of  Hamilton  and  Jefferson 
were  fundamentally  different  and  each,  looking  at 
society  from  his  own  point  of  view,  failed  to  sym- 
pathize with  the  other.  Their  opposition  was 
deeper  than  their  reason;  it  was  grounded  in  their 
emotions,  beliefs,  and  temperaments. 

As  he  looked  over  the  country,  Hamilton  saw  a 
homogeneous  economic  organization.  "At  pres- 
ent some  of  the  States,"  he  writes  in  the  Federal- 
ist, uare  little  more  than  a  society  of  husbandmen. 
Few  of  them  have  made  much  progress  in  those 
branches  of  industry  which  give  a  variety  and  com- 
plexity to  the  affairs  of  a  nation."4  At  this  time 
about  nine  tenths  of  our  population  were  farmers. 
This  condition  which  had  been  our  strength  as  an 
interdependent  part  of  the  British  Empire,b  was 
our  weakness,  Hamilton  believed,  as  an  inde- 
pendent nation.  We  were  weak  because  without 
diversification  of  our  life  we  could  never  become 
an  interdependent  unit.  National  division  of 
labor  was  unknown.  Each  farmer  endeavored,  as 
far  as  possible,  to  become  self-sufficient.  Under 

a  Works,  vol.  12,  pp.  84,  85.    The  Federalist,  No.  56. 

b  Smith,  A.,  Wealth  of  Nations.    Book  2,  ch.  5,  vol.  1,  p.  346. 

[88] 


DANGERS  OF  EXPANSION 


such  conditions,  as  List  has  pointed  out,  agricul- 
ture is  imperfect  and  a  great  part  of  the  resources 
of  nature  remain  undeveloped.4  With  the  same 
conditions  in  mind  Callender  observed  that  "towns 
and  cities  do  not  grow,  for  these  are  the  creation 
of  trade  and  industry;  no  wealthy  class  with  new 
wants  to  satisfy  develops;  the  whole  population 
becomes  accustomed  to  the  simple,  easy  conditions 
of  life,  and  there  is  small  incentive  to  strive  to 
change  them."b 

As  a  step  toward  overcoming  this  condition — 
toward  breaking  down  the  isolated  economic 
organization — Hamilton  advocates  a  vigorous 
policy  of  improvement  in  communication  and 
transportation.  "The  good  condition  of  post 
roads,"  he  says  in  an  unpublished  draft  of  his 
Report  on  Manufactures,  "especially  where  they 
happen  to  connect  places  of  landing  on  the  rivers 
and  bays,  and  those  which  run  into  the  western 
country  will  induce  exceedingly  to  the  cheapness  of 
transporting  and  the  facility  of  obtaining  raw  ma- 
terials, fuel  and  provisions.  But  the  most  useful 
assistance  perhaps  which  it  is  in  the  power  of  the 
legislature  to  give  to  manufactures  and  which  at 
the  same  time  will  equally  benefit  the  landed  inter- 
ests and  commercial  interests  is  the  improvement 

a  List,  F.,  Das  Nationale   System   der  Politischen   Oekonomie, 
ch.  20. 

b  Callender,  G.  S.,  Economic  History  of  the  United  States,  p.  7. 

[89] 


ALEXANDER  HAMILTON 


of  inland  navigation.  Three  of  the  easiest  and 
most  important  operations  of  this  kind  which 
occur  at  this  time  are  the  improvement  of  the  com- 
munication between  New  York,  Connecticut, 
Rhode  Island  and  Boston,  by  cutting  a  passage 
through  the  peninsula  of  Cape  Cod,  the  union  of 
Delaware  and  Chesapeake  Bays  by  a  canal  from 
the  waters  of  the  former  to  those  of  the  latter  and 
the  junction  of  the  Chesapeake  Bay  and  Albe- 
marle  Sound  by  uniting  the  Elizabeth  and  the 
Pasquotauk  Rivers."4  He  did  not  wish  the  con- 
struction of  roads  and  canals  left  to  the  local 
authorities;  but  he  wished  the  national  govern- 
ment "to  lend  its  direct  aid  on  a  comprehensive 
plan."b  Having  observed  the  success  of  good 
roads  and  canals  in  England,  and  knowing 
America's  need  and  uncommon  facilities  for  them, 
he  quotes  a  paragraph  from  Adam  Smith,  for 
which  the  reference  "Smith,  W.  of  Nations,  vol. 
i,  p.  219"°  is  given  on  an  early  manuscript. 
"Good  roads,  canals,  and  navigable  rivers,"  this 
passage  runs  in  part,  "by  diminishing  the  expense 
of  carriage,  put  the  remote  parts  of  a  country 
more  nearly  upon  a  level  with  those  in  the  neigh- 
borhood of  the  town They  are  advantageous 

a  Hamilton,  MS.    Manufactures,  3,  L.  C.    Cf .  Works,  vol.  4,  p. 
159.    Manufactures,  1791. 
b  Works,  vol.  4,  p.  159.    Manufactures,  1791. 
c  See  photograph  opposite  page  127. 

[90] 


DANGERS  OF  EXPANSION 


to  the  town,  by  breaking  down  the  monopoly  of 
the  country  in  its  neighborhood.  They  are  ad- 
vantageous, even  to  that  part  of  the  country. 
Though  they  introduce  some  rival  commodities 
into  the  old  market,  they  open  many  new  markets 
to  its  produce."* 

In  1799  Hamilton  wrote  to  Jonathan  Dayton, 
the  Speaker  of  the  House,  urging  the  adoption 
of  a  plan  for  the  improvement  of  roads  "coexten- 
sive with  the  Union."b  In  the  same  letter  he  pro- 
poses to  amend  the  Constitution,  empowering 
Congress  to  open  canals.  "The  power  is  very 
desirable,"  he  says,  "for  the  purpose  of  improving 
the  prodigious  facilities  for  inland  navigation  with 
which  nature  has  favored  this  country."0  In  his 
answer  to  Jefferson's  message  of  December  7, 
1 80 1,  he  again  suggests  a  policy  of  internal  im- 
provement for  the  national  government.  "To 
suggestions  of  the  last  kind,"  he  says,  "the  adepts 
of  the  new  school  have  a  ready  answer:  'Industry 
will  succeed  and  prosper  in  proportion  as  it  is  left 
to  the  exertions  of  individual  enterprise. 'd  This 
favorite  dogma,  when  taken  as  a  general  rule,  is 

a  Works,   vol.  4,    p.    160.      Manufactures,    1791.     Wealth   of 
Nations,  Book  1,  ch.  11,  pt.  1,  vol.  1,  pp.  148,  149. 

b  Works,  vol.  10,  p.  332.    To  Dayton,  1799. 

c  Works,  vol.  10,  p.  334.    To  Dayton,  1799. 

d  Hamilton  evidently  regards  Jefferson  as  a  follower  of  Adam 
Smith. 

[91] 


ALEXANDER  HAMILTON 


true ;  but  as  an  exclusive  one,  it  is  false,  and  leads 
to  error  in  the  administration  of  public  affairs. "a 

The  interest  which  Hamilton  took  in  the  im- 
provement of  the  means  of  communication  and 
transportation  is  in  full  accord  with  his  desire  for 
a  complex  national  life.  If  the  nation  developed 
manufactures  in  one  section,  and  agriculture  in 
another,  the  roads,  canals,  and  navigable  rivers 
would  become  indispensable  instruments  of  co- 
operation. Unless  the  nation  had  the  machinery 
by  which  it  could  reap  the  benefits,  national  divi- 
sion of  labor  would  be  futile ;  unless  the  manufac- 
turer could  reach  his  market  in  the  agricultural 
sections,  and  unless  the  farmer  could  market  his 
goods  quickly  in  industrial  centers,  the  whole  plan 
of  national  cooperation  would  be  at  a  standstill. 
Obstructions  to  internal  commerce  would  force 
people  near  the  seaboard  to  resort  to  foreign 
trade,  while  those  in  the  interior,  finding  their 
produce  unmarketable,  would  be  checked  in  their 
economic  development.  On  the  contrary,  roads 
and  canals  would  facilitate  the  transfer  of  goods 
and  news.  Contact  of  one  section  with  another 
would  weaken  provincialism  and  the  means  would 
be  at  hand  to  make  national  division  of  labor 
effective. 

"Questions  about  public  lands,"  Fiske  writes, 
uare  often  regarded  as  the  driest  of  historical 

a  Works,  vol.  8,  p.  262.    December  24,  1801. 
[92] 


DANGERS  OF  EXPANSION 


deadwood Yet  there  is  a  great  deal  of  the 

philosophy  of  history  wrapped  up  in  this  subject 
.  .  .  .  ;  for  without  studying  this  creation  of  a  na- 
tional domain  between  the  Alleghenies  and  the 
Mississippi,  we  cannot  understand  how  our  Fed- 
eral Union  came  to  be  formed."*  The  policy  of 
expansion  advocated  by  Hamilton  had  for  its  pur- 
pose the  completion  of  the  territorial  unity  of  the 
United  States,  and  the  control  of  the  unsettled 
lands  by  the  nation  in  the  interest  of  the  nation. 
At  the  close  of  the  Revolution,  seven  of  the  origi- 
nal States  claimed,  as  a  part  of  their  colonial 
grants,  land  in  the  West.  Disputes  were  threat- 
ening the  peace  of  the  nation.  uln  the  wide  field 
of  western  territory,"  Hamilton  said,  uwe  per- 
ceive an  ample  theater  for  hostile  pretensions, 
without  any  umpire  or  common  judge  to  interpose 
between  the  contending  parties. "b  It  was  fortu- 
nate, therefore,  that  the  States  were  prevailed 
upon,  between  1784  and  1802,  to  turn  over  their 
disputed  claims  to  the  Federal  government. 
These  grants  made  up  part  of  the  vast  national 
domain  which  was  to  be  increased  by  treaty  and 
purchase. 

Hamilton  believed  that  we  were  uthe  embryo  of 
a  great  empire,"  and  that  our  situation  prompted 
us  uto  aim  at  an  ascendant  in  American  affairs." 

a  Fiske,  John,  The  Critical  Period  of  American  History,  ch.  5. 
b  Works,  vol.  11,  p.  45.    The  Federalist,  No.  7. 
[93] 


ALEXANDER  HAMILTON 


The  specter  of  foreign  influence  in  western 
affairs  haunted  him.  He  thought  that  the  very 
existence  of  the  Union  would  be  threatened  if  we 
were  pent  up  on  the  Atlantic  coast  by  Spanish, 
French,  and  the  English  possessions  in  the  West. 
In  1795  he  advocated  the  adoption  of  the  Jay 
Treaty  because  it  would  give  us  control  of  the 
western  posts.  "The  possession  of  those  posts  by 
us,"  he  says,  "has  an  intimate  connection  with  the 
preservation  of  union  between  our  western  and 
Atlantic  territories;  and  whoever  can  appreciate 
the  immense  mischiefs  of  a  disunion  will  feel  the 
prodigious  value  of  the  acquisition."*  Louisiana, 
in  the  South,  was,  down  to  1801,  in  the  possession 
of  Spain.b  The  control  over  the  Mississippi  which 
this  gave  her,  seemed  to  Hamilton  a  serious 
menace  to  our  nationality.  "The  navigation  of 
the  Mississippi,"  he  writes  to  Jay  in  1794,  "is  to  us 

an  object  of  immense  consequence If  the 

government  of  the  United  States  can  procure  and 
secure  the  enjoyment  of  it  to  our  western  country, 
it  will  be  an  infinitely  strong  link  of  union  between 
that  country  and  the  Atlantic  States."0  This  right 
was  secured  the  next  year  by  treaty;  but  Hamilton 
wished  all  the  western  territory  to  be  under 
American  control.  "If  Spain,"  he  wrote  a  few 

a  Works,  vol.  5,  p.  255.    Camillus,  1795. 

b  Louisiana  was  receded  to  France  at  the  Peace  of  Luneville. 

c  Works,  vol.  5,  pp.  127,  128.    To  Jay,  May  6,  1794. 

[94] 


DANGERS  OF  EXPANSION 


years  later,  "would  cede  Louisiana  to  the  United 
States,  I  would  accept  it  absolutely  if  obtainable 
absolutely,  or  with  an  engagement  to  restore,  if  it 
cannot  be  obtained  absolutely."*  He  wished  the 
nation  to  look  to  the  possessions  of  the  Floridas 
as  well  as  Louisiana,  and  even  uto  squint  at  South 
America. "b  The  acquisition  of  these  western 
territories,  he  said,  he  had  long  considered  as 
"essential  to  the  permanency  of  the  Union."0  He 
was  of  the  opinion  that  the  cession  of  Louisiana  to 
France  was  the  most  deeply  interesting  question 
since  Independence;  that  it  threatened  the  dis- 
memberment and  insecurity  of  the  Union,  and  that 
it  was  a  justifiable  cause  for  declaring  war.d 
Fortunately  Jefferson  and  Hamilton  agreed  on  the 
value  of  Louisiana,  and  the  former,  as  President, 
in  1803,  negotiated  the  purchase  from  Napoleon. 
"It  was  Napoleon,"  Seeley  says,  "who,  by  selling 
Louisiana  to  the  United  States,  made  it  possible 
for  the  Union  to  develop  into  the  gigantic  Power 
we  see."6 

Mere  ownership  of  the  western  lands,  however, 
was  not  enough.  Hamilton  proposed  to  use  them 
for  national  purposes.  Although  he  was  anxious 

a  Works,  vol.  10,  p.  280.    To  Pickering,  March  27,  1798. 
b  Works,  vol.  7,  p.  97.    To  McHenry,  June  27,  1799. 
c  Works,  vol.  10,  p.  339.    To  Otis,  January  26,  1799. 
d  Works,  vol.  6,  pp.  333,  334.     Pericles,  1803. 
e  Seeley,  J.  R.,  The  Expansion  of  England,  p.  157. 

[95] 


ALEXANDER  HAMILTON 


to  improve  the  territorial  imperfections  of  the 
nation,  it  was  no  part  of  his  plan  to  encourage 
rapid  settlement  from  the  old  States.  He,  in  fact, 
desired  the  central  government  to  control  the  lands 
in  order  to  prevent  migrations.  If  the  nation  con- 
trolled the  western  lands,  three  purposes  would 
be  accomplished:  the  Union  would  be  protected 
from  foreign  influences  and  encroachment;  the 
sale  of  the  lands  would  help  liquidate  the  national 
debt;  and  the  lands  could  be  reserved  or  put 
in  the  hands  of  companies  in  order  to  prevent  the 
shifting  of  population  until  redundancy  required 
it.  Hamilton  was  opposed,  at  that  time,  to  any- 
thing like  the  "Homestead  Act"  of  '62.  Any 
policy,  he  thought,  that  would  encourage  individ- 
uals to  leave  the  old  States  and  to  take  small 
holdings  in  the  West,  was  anti-national;  it  would 
perpetuate  indefinitely  the  agricultural  society. 
Since  the  population  of  the  nation  was  small  at 
best,  any  policy  that  would  encourage  rapid  settle- 
ment would  be  prejudicial  to  the  growth  of  a 
diversified  national  life.  Hamilton's  policy  was 
to  reserve  the  free  lands  for  future  national 
growth,  and  to  encourage  the  people  of  his  time  to 
develop  the  resources  of  the  old  States.  He  con- 
sidered homogeneous  expansion  to  be  a  national 
weakness  and  danger. 

How,  then,  was  the  "natural"  flow  of  popula- 
tion westward  to  be  checked?     Had  the  govern- 

[96] 


DANGERS  OF  EXPANSION 


ment  any  duty?  Was  it  impertinent  for  the  states- 
man to  meddle  here  ?  It  seemed  to  be  a  clear  case 
of  conflict  between  individualism  and  nationalism, 
and  Hamilton  did  not  hesitate  in  his  choice.  He 
proposed  at  different  times  four  lines  of  policy  by 
which  the  dislocation  of  population  was  to  be  dis- 
couraged: first,  by  teaching  the  people  of  the  old 
States  improved  methods  of  agriculture ;  secondly, 
by  laying  indirect  and  excise  taxes  rather  than 
direct  taxes  on  land;  thirdly,  by  assuming  the 
State  debts ;  fourthly,  by  his  land  policy. 

American  agriculture  was  in  a  very  primitive 
state,  and  there  was  a  constant  temptation  to  leave 
the  lands,  impoverished  by  unscientific  methods, 
for  those  of  frontier.  Such  a  moving  frontier  as 
western  settlement  would  produce,  would,  Hamil- 
ton thought,  keep  the  people  restless  and  unstable. 
He,  therefore,  proposed  to  teach  the  people  im- 
proved methods  in  the  cultivation  of  land,  and  for 
the  furthering  of  this  purpose  he  recommended, 
in  a  speech  drafted  for  Washington,  the  establish- 
ment of  a  Board  of  Agriculture.  "Agriculture 
among  us,"  he  says,  uis  certainly  in  a  very  im- 
perfect state.  In  much  of  those  parts  where  there 
have  been  early  settlements,  the  soil,  impoverished 
by  an  unskillful  tillage,  yields  but  a  scanty  reward 
for  the  labor  bestowed  upon  it,  and  leaves  its 
possessors  under  strong  temptation  to  abandon 
it  and  emigrate  to  distant  regions,  more  fertile, 

[97] 


ALEXANDER  HAMILTON 


because  they  are  newer,  and  have  not  yet  been 
exhausted  by  an  unskillful  use.  This  is  every  way 
an  evil.  The  undue  dislocation  of  our  popula- 
tion from  this  cause  promotes  neither  the  strength, 
the  opulence,  nor  the  happiness  of  our  country.  It 
strongly  admonishes  our  national  councils  to  apply, 
as  far  as  may  be  practical,  by  natural  and  salu- 
tary means,  an  adequate  remedy.  Nothing 
appears  to  be  more  unexceptionable  and  likely  to 
be  more  efficacious,  than  the  institution  of  a 
Board  of  Agriculture."4  He  also  recommended, 
at  another  time,  the  founding  of  a  society  whose 
function  it  should  be  to  encourage,  by  premiums, 
"new  inventions,  discoveries,  and  improvements  in 
agriculture."1* 

Hamilton  never  advocated  direct  taxes  on  land. 
He  favored  import  duties  and  excise  duties,  such 
as  the  whiskey  and  carriage  tax,  but  he  feared  that 
direct  taxes  on  land  would  incite  rapid  settlement 
to  new  lands.  "Particular  caution,"  he  says,  as 
early  as  1782,  "ought  at  present  to  be  observed  in 
this  country  not  to  burthen  the  soil  itself  and  its 
productions  with  heavy  impositions,  because  the 
quantity  of  unimproved  land  will  invite  the  hus- 
bandman to  abandon  old  settlements  for  new,  and 
the  disproportion  of  our  population  for  some  time 
to  come  will  necessarily  make  labor  dear,  to  reduce 

a  Works,  vol.  8,  pp.  215,  216.    December  7,  1796. 
*  Works,  vol.  10,  p.  331.    To  Dayton,  1799. 

[98] 


DANGERS  OF  EXPANSION 


which,  and  not  to  increase  it,  ought  to  be  a  capital 
object  of  our  policy."* 

This  motive  was  also  back  of  Hamilton's  policy 
for  assuming  the  State  debts.  If  the  national 
government  had  not  assumed  the  debts,  he  said,  in 
defence  of  the  funding  system,  a  particular  incon- 
venience might  have  been  the  transfer  of  the  popu- 
lation from  "more  to  less  beneficial  situations  in 
a  national  sense. "b  Some  of  the  States,  before 
assumption,  had  much  heavier  debts  than  others. 
To  pay  these  debts,  of  course,  these  States  would 
have  had  to  lay  heavy  taxes  on  the  citizens.  This 
would  cause  migrations  in  order  to  escape  taxa- 
tion either  to  the  lightly  taxed  States  or  to  the  un- 
settled parts  of  the  country. 

"It  could  not  but  disturb  in  some  degree,"  as 
Hamilton  expressed  it,  "the  general  order,  the 
due  course  of  industry,  the  due  circulation  of  public 
benefits."0  A  result  of  the  transfer  of  the  popu- 
lation from  the  settled  to  the  unsettled  sections  of 
the  country  would  be  "to  retard  the  progress  in 
general  improvement,  and  to  impair  for  a  greater 
length  of  time  the  vigor  of  the  nation,  by  scatter- 
ing too  widely  and  sparsely  the  elements  of  re- 
source and  strength. "d  It  was  no  ill  recommenda- 

a  Works,  vol.  1,  p.  279.  The  Continentalist,  July  4,  1782. 

b  Works,  vol.  9,  p.  26.  The  Funding  System,  1795   (?). 

c  Works,  vol.  9,  p.  26.  The  Funding  System,  1795    (?). 

d  Works,  vol.  9,  p.  27.  The  Funding  System,  1795    (?). 

[99] 


ALEXANDER  HAMILTON 


tion  of  assumption,  then,  that  it  made  the  popula- 
tion more  stable  and,  by  equalizing  the  burden  of 
the  debt  in  all  parts  of  the  nation,  made  the  people 
contented  to  develop  a  more  complex  life.  "The 
true  politician,"  Hamilton  says,  "will  content  him- 
self by  seeing  new  settlements  formed  by  the  cur- 
rent of  a  redundant  population :  ....  he  will  seek 
to  tie  the  emigrants  to  the  friends  and  brethren 

they  leave But  he  will  not  accelerate  this 

transfer  by  accumulating  artificial  disadvantages 
on  the  already  settled  parts  of  the  country;  he  will 
even  endeavor  to  avoid  this  by  removing  such  dis- 
advantages if  casual  causes  have  produced  them." 
"I  deem  it,"  he  adds,  "no  small  recommendation 
of  the  assumption  that  it  was  a  mild  and  equitable 
expedient  for  preventing  a  violent  dislocation  of 
the  population  of  particular  States."* 

Hamilton  sent  to  the  House  of  Representatives, 
on  the  22d  of  July,  1790,  a  report  on  the  dis- 
position of  public  lands.b  The  noticeable  omis- 
sion is  that  he  says  nothing  about  giving  the  lands 
away  to  settlers.  He,  on  the  contrary,  recom- 
mends that  the  land  be  sold  for  thirty  cents  per 
acre,  to  be  paid  for  either  in  gold  or  silver  or  in 
public  security.0  The  usual  reason  assigned  for 
this  charge  is  Hamilton's  desire  to  extinguish  the 

a  Works,  vol.  9,  pp.  27,  28.     Funding  System,  1795   (?). 
*  Works,  vol.  8,  pp.  87-94.    July  22,  1790. 
c  Works,  vol.  8,  p.  90. 

[100] 


DANGERS  OF  EXPANSION 


public  debt.  While  this  is  obviously  true,  it  is  a 
very  superficial  explanation.  His  land  policy  was 
fundamentally  a  part  of  his  plan  for  building  a 
heterogeneous,  interdependent  nation.  It  was  a 
policy  to  discourage  rapid  settlement. 

Purchases  of  land,  Hamilton  thought,  might  be 
contemplated  from  three  classes:  moneyed  indi- 
viduals and  companies  who  will  buy  to  sell  again ; 
associations  of  persons  who  intend  to  make  settle- 
ments themselves;  single  persons  or  families  resi- 
dent in  the  western  country,  or  who  might  emi- 
grate thither.a  The  first  two  classes  would  wish 
considerable  tracts;  the  last,  small  farms. 
"Hence,"  Hamilton  adds,  "a  plan  for  the  sale  of 
the  western  lands,  while  it  may  have  due  regard 
for  the  last,  should  be  calculated  to  obtain  all  the 
advantages  which  may  be  derived  from  the  two 
first  classes. "b  He  therefore  recommended  that 
the  chief  land  office  be  established  at  the  seat  of 
government  so  that  both  citizens  and  foreigners 
might  have  the  first  opportunity  for  large  pur- 
chases. He  further  suggests  that  no  Indian  land 
be  sold;  that  land  be  set  aside  to  satisfy  subscribers 
to  the  public  debt;  that  sales  of  land  be  made, 
when  desired,  in  townships  ten  miles  square;  and 
that  no  credit  be  given  for  any  quantities  less  than 
a  township.  By  his  land  policy  he  hoped  to  tie  up 


a  Works,  vol.  8,  p. 
b  Works,  vol.  8,  p. 


[101] 


ALEXANDER  HAMILTON 


large  tracts  of  land  on  which  emigrants  could  not 
settle,  and  to  encourage  speculators,  both  foreign 
and  domestic,  to  hold  the  land  for  future  use.  He 
hoped  that  the  land  purchased  under  these  condi- 
tions, and  the  land  reserved  for  public  creditors 
and  Indians,  would  leave  only  a  limited  amount 
for  the  small  farmer.  His  plan  was  to  restrict 
the  land  available  for  immediate  settlement,  and 
to  put  it  in  the  hands  of  moneyed  men,  so  that  the 
natural  current  of  population  westward  would  be 
discouraged  and  the  people  would  be  forced  to 
diversify  their  life. 

The  Socialists  have  a  very  ingenious  explana- 
tion for  Hamilton's  opposition  to  the  rapid  settle- 
ment of  the  free  lands.  The  capitalistic  system  of 
society,  Loria  says,  is  based  on  the  violent  suppres- 
sion of  free  lands.a  As  long  as  free  lands  exist, 
the  laborer  can  get  a  living  for  himself,  and  the 
capitalist  has  no  opportunity  to  exploit  him. 
Since  the  laborer  will  not  work  for  wages  as  long 
as  he  can  be  a  small  proprietor,  it  becomes  a  policy 
of  the  capitalistic  class  to  deprive  him  of  his  inde- 
pendence and  power  by  suppressing  free  lands. 
If  they  are  not  suppressed  in  colonial  countries,  no 
capitalistic  organization  can  develop,  because 
wages  are  high  and  the  laborer  always  has  the 
alternate  of  becoming  a  landowner.  If,  on  the 

a  Loria,   A.,  Le  Basi  Economiche   della   Costituzione  Sociale. 
Conclusion,  sec.  3. 

[102] 


DANGERS  OF  EXPANSION 


contrary,  the  capitalist  can  get  control  of  either 
the  laborer  by  slavery  or  the  lands  by  purchase  or 
legislation,  the  establishment  of  his  system  is 
assured.  "Thus  the  basis  of  capitalistic  prop- 
erty," Loria  says,  "is  always  the  same,  it  rests 
upon  the  suppression  of  the  free  lands  and  the  ex- 
clusion of  the  laborer  from  access  to  the  produc- 
tive powers  of  the  soil."a 

Ugo  Rabbeno  accepts  Loria's  theory  of  society 
and,  having  reviewed  the  land  policy  of  Hamilton, 
thinks  that  he  finds  in  it  proof  for  the  socialistic 
interpretation  of  history.b  Hamilton,  who,  ac- 
cording to  Rabbeno,  is  the  prophet  of  American 
capitalism,  endeavored,  he  claims,  by  his  land 
policy  to  advance  the  interests  of  the  rising  capi- 
talistic class.  He  sought  to  keep  the  poor  laborer 
off  the  free  lands,  so  that  wages  could  be  forced 
down  and  the  capitalistic  form  of  production 
would  develop.  By  the  law  of  1796  the  recom- 
mendations of  Hamilton,  in  a  slightly  modified 
form,  were  enacted  into  law.  "Laborers,"  Rab- 
beno says,  "were  absolutely  prevented  from  ac- 
quiring public  lands;  whilst  hundreds  of  thousands 
of  acres  in  separate  lots  became  the  property  of 
capitalists  or  corporations,  who  either  kept  them 
for  themselves,  constituting  enormous  estates,  or 

a  Loria,  A.,  Le  Basi  Economiche  della  Constituzione  Sociale, 
ch.  1. 

b  Rabbeno,  U.,  Protezionismo  Americano,  Essay  2,  ch.  4,  sec. 
29. 

[103] 


ALEXANDER  HAMILTON 


else  resold  them  with  great  profits  to  the  colon- 
ists/" Rabbeno,  therefore,  concludes  that  the 
central  government,  run  for  the  benefit  of  moneyed 
men,  had  a  land  policy  which  tallied  with  the 
interests  of  the  capitalists ;  that  it  was  an  abortive 
effort  to  establish  the  capitalistic  system  before  its 
day,  and  that,  in  so  far  as  it  kept  the  proletariat 
off  the  free  lands,  it  made  its  exploitation  possible. 
Loria  and  Rabbeno  have  interpreted  history 
from  the  materialistic  point  of  view.  Their 
theory  is  that  religions,  morals,  laws,  ideas,  and 
motives  of  great  men  depend  on  and  are  deter- 
mined by  the  existing  economic  organization  of 
society.  They,  however,  have  disregarded  the 
complexity  of  social  causes.  Their  purpose  is  to 
prove  that  all  history  is  class  struggle  and  they 
therefore  need  the  materialistic  interpretation  of 
history ;  but  they  should  remember  that  this  theory 
is  true  only  in  relation  to  its  premise.  There  are 
other  causes  in  society.  They  are  religious,  legal, 
and  personal.  Ideas  are  creator  as  well  as  created. 
Man  is  not  only  a  product  of  conditions ;  he  is  also 
a  molder  of  his  environment.  His  will  is  a  factor 
in  the  equation.  However  much  the  socialist  tries 
to  laugh  the  great-man  theory  of  history  out  of 
court,  the  fact  remains  that  what  men  have  felt 
and  thought  has  determined  the  course  of  human 

a  Rabbeno,  U.,  Protezionismo  Americano,  Essay  2,  ch.  4,  sec. 
29. 

[104] 


DANGERS  OF  EXPANSION 


progress.  Their  wills  have  directed,  restrained, 
or  encouraged  the  incoherent  tendencies  or  pas- 
sions of  the  people.  They  have  shown  that  human 
society  is  not  merely  a  mechanism,  fated  inevitably 
to  certain  ends,  but  that  it  is  an  organism  for 
which  we  are  responsible  and  whose  destiny  is 
largely  within  the  power  of  man. 

Rabbeno,  in  his  search  for  evidence  of  Loria's 
theory  in  America,  does  not  strengthen  his  chosen 
faith  by  citing  Hamilton.  Hamilton  was  in  no 
way  the  prophet  and  champion  of  the  capitalistic 
class;  he  was  the  prophet  and  champion  of  Ameri- 
can Union.  If  there  was  any  one  thing  which  he 
hated  and  fought,  it  was  the  rule  of  a  faction  or 
a  class.  He  did  not  care  which  particular  class 
was  supreme  so  long  as  that  supremacy  was  in  line 
with  national  greatness.  Classes  as  well  as  indi- 
viduals were  his  means  for  nation-building.  They 
were,  we  might  say,  chessmen  on  the  national  chess 
board,  and  it  was  his  duty  and  the  duty  of  every 
statesman,  he  believed,  to  move  and  control  them 
so  as  to  win  the  game.  There  were,  in  fact,  no 
classes  in  the  socialistic  sense  in  Hamilton's  day. 
There  were  two  parties;  the  national  and  the  anti- 
national.  The  former  was  made  up  of  conserva- 
tive and,  to  some  extent,  wealthy  men  who  be- 
lieved in  the  traditions  of  the  Anglo-Saxon  race. 
Hamilton  in  his  statesmanship  used  this  class  to 
strengthen  nationality.  The  latter  party  was  made 

[105] 


ALEXANDER  HAMILTON 


up  of  men  imbued  with  French  ideas  and  preju- 
dices of  States  Rights.  They  were  restless  and  un- 
stable. To  Hamilton's  mind  they  were  a  faction 
which  should  be  restrained  for  the  national  wel- 
fare. His  policy  concerning  free  lands  directed 
against  this  latter  class  was,  therefore,  a  national 
policy.  It  was  to  prevent  homogeneous  expan- 
sion and  to  require  the  people  to  build  up  an  inter- 
dependent, diversified  life.  It  was  to  strengthen 
the  nation  by  using  one  part  of  the  population  and 
restraining  another. 

The  national  propensity  of  the  American  people 
for  agriculture  led  them  to  favor  a  philosophy  that 
made  agriculture  the  most,  if  not  the  only,  produc- 
tive industry.  The  doctrines  of  the  Physiocrats 
came  to  this  country  along  with  the  rest  of  the 
French  invasion.  They  were  widely  enough 
known  to  lead  Hamilton  to  answer  them,  with 
arguments  taken  substantially  from  Adam  Smith, 
in  his  Report  on  Manufactures. 

The  Physiocrats  maintained  the  exclusive  pro- 
tectiveness  of  agriculture.  "Labor,"  Hamilton 
says  in  stating  their  argument,  "bestowed  upon  the 
cultivation  of  land  produces  enough  not  only  to 
replace  all  the  necessary  expenses  incurred  in  the 
business,  and  to  maintain  the  persons  who  are  em- 
ployed in  it,  but  to  afford,  together  with  the  ordi- 
nary profit  on  the  stock  or  capital  of  the  farmer,  a 
net  surplus  or  rent  for  the  landlord  or  proprietor 

[106] 


DANGERS  OF  EXPANSION 


of  the  soil.  But  the  labor  of  artificers  does 
nothing  more  than  to  replace  the  stock  which  em- 
ploys them  .  .  .  .  ,  and  yields  the  ordinary  profits 
upon  that  stock.  It  yields  nothing  equivalent  to 
the  rent  of  land ;  neither  does  it  add  anything  to  the 
total  value  of  the  whole  annual  produce  of  the  land 

and  labor  of  the  country It  can  only  be  by 

saving  or  parsimony,  not  by  the  positive  produc- 
tiveness of  their  labor,  that  the  classes  of  artificers 
can,  in  any  degree,  augment  the  revenue  of  the 
society."a 

To  this  Hamilton  answers :  First,  if  the  manu- 
facturer adds  to  the  raw  material  value  equal  to 
the  agricultural  products  consumed,  it  can  not  be 
said  that  his  labor  is  unproductive;  second,  the 
wealth  of  the  community  cannot  be  increased  either 
by  the  cultivator  or  artificer,  except  by  saving; 
thirdly,  since  production  can  be  increased  only  by 
an  increase  in  the  quantity  or  in  the  productive 
powers  of  labor,  the  labor  of  the  artificer  is  at 
least  as  productive  as  the  cultivator,  since  it  is 
more  susceptible  to  subdivision  and  the  applica- 
tion of  machinery.15 

Hamilton  proceeds  now  to  criticise  Adam 
Smith's  conclusion  that  agriculture  is  more  pro- 
ductive than  any  other  employment.  It  will  be 

a  Works,  vol.  4,  pp.  74,  75.      Cf.  Wealth  of  Nations,  Book  4, 
ch.  9,  vol.  2,  pp.  162-172. 

b  Works,  vol.  4,  pp.  75-77.    Manufactures,  1791. 

[107] 


ALEXANDER  HAMILTON 


interesting  to  compare  an  early  unpublished  draft 
with  the  final  draft  of  his  opening  paragraph: 

"But  while  it  has  been  thus  con-  "But  while  the  exclusive  produc- 

tended  that  the  labour  of  artificers  tiveness  of  agricultural  labor  has 

and  manufacturers  ought  not  to  be  been  denied  and  refuted,  the  supe- 

considered   as  wholly  barren  and  riority  of   its   productiveness   has 

unproductive   it  has   been  at  the  been  conceded  without  hesitation, 

same  time  conceded  that  it  is  not  As  this  concession  involves  a  point 

equally    productive   with    that   of  of  considerable  magnitude,  in  rela- 

husbandmen  or  cultivators;  a  frosi-  tion  to  maxims  of  public  adminis- 

tion  which  has  obtained  no  inconsid-  tration,   the  grounds  on  which  it 

erable  currency  in  this  country,  and  rests  are  worthy  of  a  distinct  and 

which  being  of  great  importance  in  particular  examination. "b 
its  relation  to  maxims  of  public  ad- 
ministration is  not  unworthy  of  an 
examination    on    the   grounds   on 
which  it  rests. "a 

uNo  equal  capital,"  Adam  Smith  says,  uputs 
into  motion  a  greater  quantity  of  productive  labor 

than  that  of  the  farmer In  agriculture,  too, 

nature  labors  along  with  man  and  though  her 
labor  costs  no  expense,  its  produce  has  its  value,  as 
well  as  that  of  the  most  expensive  workmen."0 
This  argument  Hamilton  refers  to  as  "both  quaint 
and  superficial."*  The  skill  of  man,  he  argues, 
laid  out  on  manufactured  products  may  be  more 
productive  of  value  than  the  labor  of  nature  and 
man  combined.  He  says  further  that  mechanical 
powers  are  more  applicable  to  manufactures  than 
to  agriculture;  that  manufacturing  labor  is  more 

a  Hamilton,  MS.    Manufactures,  2,  L.  C. 

b  Works,  vol.  4,  p.  77.    Manufactures,  1791. 

c  Smith,  A.,  Wealth  of  Nations,  Book  2,  ch.  5,  vol.  1,  p.  343. 

d  Works,  vol.  4,  p.  77.    Manufactures,  1791. 

[108] 


DANGERS  OF  EXPANSION 


constant  since  it  is  not  dependent  on  seasons;  and 
that  the  agriculturist,  because  of  his  easy  condi- 
tion of  life,  is  often  remiss  in  cultivation;  while 
manufacturing  labor,  on  the  contrary,  has  open  to 
it  a  wider  field  for  the  exertion  of  ingenuity  and 
more  stimuli  impelling  it  to  productiveness.* 

Hamilton,  like  Adam  Smith,  had  no  conception 
of  rent  as  an  unearned  increment.11  But  while  he 
did  not  understand  this  phenomenon  of  distribu- 
tion— a  phenomenon  which  had  not  yet  appeared 
in  America — he  saw,  from  the  point  of  view  of 
production,  the  fallacy  of  the  Physiocrats  and  of 
Smith,  who  assumed  that,  because  land  yielded 
rent,  it  had  a  superior  productiveness. 

Rent,  we  may  mention  parenthetically,  has  two 
aspects.  If  we  consider  it  as  a  factor  in  distri- 
bution, there  arises,  by  virtue  of  the  institution  of 
private  property,  an  unearned  increment;  rent 
here  is  income,  going  to  the  landlord  because 
he  has  a  peculiar  social  advantage.  His  land, 
having  a  superior  productiveness  or  position  over 
the  price-determining  land  on  the  margin  of  cul- 
tivation, yields  a  rent  which,  as  far  as  he  is  per- 
sonally concerned,  is  unearned.  On  the  other 
hand,  rent  from  the  point  of  view  of  the  entre- 
preneur is  a  sum  of  money  paid  for  a  peculiar 

a  Works,  vol.  4,  p.  78.    Manufactures,  1791. 
b  Rabbeno,  U.,  Protezionismo  Americano,  Essay  3,  ch.  1,  sec. 
12. 

[109] 


ALEXANDER  HAMILTON 


form  of  capital  goods,  i.e.,  it  is  interest  paid  for 
capital  in  land.  From  the  standpoint  of  produc- 
tion, rent  and  interest  are  identical. 

The  difficulty  with  Smith  and  the  Physiocrats 
was  that  they  confused  these  two  ways  of  looking 
at  rent.  They  saw  that  the  landlord  received  an 
income  apparently  for  no  other  reason  than  that 
he  owned  the  land;  but  instead  of  ascribing  this  to 
the  institutional  cause  of  distribution,  they  ex- 
plained it  as  a  phenomenon  of  production.  This 
was  the  fallacy.  The  distinction  which  they  drew 
between  capital  in  manufacturing  goods  and  capi- 
tal in  land,  Hamilton  said,  was  "rather  verbal 
than  substantial."11  "The  rent  of  the  landlord  and 
the  profit  of  the  farmer,"  he  says,  "are  nothing 
more  than  the  ordinary  profits  of  two  capitals 
belonging  to  two  different  persons,  and  united  in 
the  cultivation  of  a  farm."b  "The  question  must 
still  be,"  he  concludes,  "whether  the  surplus,  after 
defraying  expenses,  of  a  given  capital,  employed 
in  the  purchase  and  improvement  of  a  piece  of 
land,  is  greater  or  less  than  that  of  a  like  capital, 
employed  in  the  prosecution  of  a  manufactory 
....  or  rather  perhaps  whether  the  business  of 
agriculture  or  that  of  manufactures  will  yield  the 
greater  product,  according  to  a  compound  ratio 
of  the  quantity  of  the  capital  and  the  quantity  of 

a  Works,  vol.  4,  p.  79.     Manufactures,  1791. 
b  Works,  vol.  4,  p.  80.    Manufactures,  1791. 

[110] 


DANGERS  OF  EXPANSION 


labor  which  are  employed  in  the  one  or  in  the 
other."4 

Mankind  in  its  social  evolution  develops,  ac- 
cording to  Herbert  Spencer,  from  an  incoherent, 
homogeneous  to  a  coherent,  heterogeneous  so- 
ciety.15 Cooperation  and  differentiation  are  the 
very  essence  of  progress.  In  the  time  of  Hamil- 
ton, the  United  States  was  in  the  first  stage  of 
social  evolution — it  was  incoherent  and  homo- 
geneous. The  purpose  of  Hamilton's  economic 
policies  was  to  develop,  by  legislation,  social  co- 
herence and  heterogeneity.  His  goal  was  the 
national  diversification  of  industry.  Within  the 
nation  he  wished  to  see  great  cities  as  well  as 
great  plantations,  busy  factories  as  well  as  fertile 
farms,  and  vigorous,  enterprising  merchants  as 
well  as  husbandmen.  His  idea  was  that  the  more 
complex  the  national  life  was,  the  more  the  parts 
would  be  dependent  on  each  other  and  that,  united 
with  the  bonds  of  mutual  needs,  we  would  become 
a  strong  coherent  nation.  Free  lands,  he  thought, 
would  perpetuate  the  incoherent,  colonial  life, 
which,  however  desirable  it  was  for  us  as  colonies 
of  Great  Britain,  was  undesirable  for  us  as  a 
nation.  His  policy,  opposing  western  emigration, 
was  intended  to  erect  barriers,  behind  which  an 
interdependent,  complex  civilization  might  grow. 

a  Works,  vol.  4,  pp.  80,  81.    Manufactures,  1791. 

b  Spencer,  H.,  Principles  of  Sociology,  pt.  2,  ch.  12,  sec.  271. 

[Ill] 


CHAPTER  EIGHTH 

MANUFACTURES 

Hamilton  was  not  wont  to  lay  down  principles 
or  draw  conclusions  without  the  facts  before  him. 
He  therefore  conducted,  as  preparation  for  the 
writing  of  his  famous  Report  on  Manufactures 
submitted  to  Congress,  December  5,  1791,  an  in- 
vestigation into  the  actual  condition  of  manufac- 
tures in  the  United  States  at  that  time. 

Some  writers  have  noticed  that  Hamilton 
seemed  in  his  report  to  be  familiar  with  the  state 
of  industry  in  this  country  but  they  give  no  expla- 
nation of  how  he  obtained  his  information. 
Among  the  Hamilton  papers  in  the  Library  of 
Congress  there  are  a  large  number  of  unpublished 
letters,  written  to  him  or  his  agents,  from  all  parts 
of  the  country,  which  discuss  the  extent,  organi- 
zation and  needs  of  manufactures.  It  will  be 
possible  here  only  to  indicate  briefly  the  nature  of 
this  material. 

Hamilton  sent  a  request  to  a  leading  citizen, 
usually  an  official,  in  each  of  the  large  states,  for 
information  on  manufactures;  these  persons,  in 
turn,  requested  the  information  from  leading  citi- 
zens and  manufacturers  in  the  towns.  The  system 
of  gathering  the  facts  was  not  the  same  in  every 
state.  John  Chester  writes  to  Hamilton  from  the 

[112] 


MANUFACTURES 


office  of  Supervisor  in  Connecticut,  October  n, 
1791:  "After  having  revolved  in  my  mind  several 
plans  for  obtaining  the  necessary  information, 
none  was  thought  of  which  afforded  so  flattering 
prospects  as  that  which  was  adopted,  of  writing 
to  each  member  of  the  upper  branch  of  our  legis- 
lature as  well  as  to  many  of  the  principal  manu- 
facturers."* "Agreeable  to  your  request,"  runs 
another  letter  dated  at  Charleston,  S.  C.,  Sep- 
tember 3,  1791,  "have  wrote  a  circular  letter  to 
the  most  leading  characters  throughout  the  state, 
relative  to  manufactures  that  may  be  carried  on 
in  the  several  counties. "b  A  letter  received  in 
reply  to  a  letter  similar  to  the  above,  sent  out  by 
John  Dexter,  Supervisor  in  Rhode  Island,  is  in 
part  as  follows :  "I  duly  recd  thy  Lre  of  the  7th  ins* 
with  a  copy  of  a  Lr  from  the  Secry  of  the  Treasury 
of  the  22d  ul°  inclosed,  and  ....  I  shall  cheerfully 
give  every  information  in  my  power  which  may 
contribute  to  further  the  views  of  the  National 
Legislature  or  assist  the  Secry  in  forming  a  plan 
for  promoting  Manufactures  in  the  United 
States."0 

In  his  investigation  Hamilton  gave  particular 

a  Hamilton,  MSS.,  vol.  11,  p.  181,  L.  C. 

b  Hamilton,  MSS.,  vol.  11,  p.  Ill,  L.  C.  Stevens  to  Hamil- 
ton. 

c  Hamilton,  MSS.,  vol.  11,  p.  75,  L.  C.  Moses  Brown  to 
John  Dexter,  July  22,  1791. 

[113] 


ALEXANDER  HAMILTON 


attention  to  domestic  manufactures.  "There  is," 
he  observed,  "a  vast  scene  of  household  manu- 
facturing which  contributes  more  largely  to  the 
supply  of  the  community  than  could  be  imagined 
without  having  made  it  an  object  of  particular 
inquiry."*  Several  small  but  careful  house  to 
house  censuses  of  domestic  production  were 
taken,  the  most  valuable  being  that  of  Drury 
Ragsdale  in  Virginia.  In  at  least  one  case  the 
facts  were  gathered  by  young  women.  Very  often 
samples  of  domestic  products  accompanied  the 
reports  submitted  to  the  Secretary  of  the  Treas- 
ury. P.  Colt  in  reviewing  manufactures  in  Con- 
necticut states  very  clearly  the  organization  of 
industry  in  that  state.  "The  manufactures  of  this 
state,"  he  writes,  "naturally  present  themselves 
to  our  view  under  the  following  heads:  Those 
carried  on  in  families  merely  for  the  consumption 
of  those  families;  those  carried  on  in  like  manner 
for  the  purpose  of  barter  or  sale;  and  those 
carried  on  by  tradesmen,  single  persons,  or  com- 
panies for  supplying  the  wants  of  others,  or  for 
the  general  purpose  of  merchandise  or  com- 
merce."13 

We  may  obtain  from  the  unpublished  letters 
and  reports  gathered  by  Hamilton  and  from  his 

a  Works,  vol.  4,  p.  128.    Manufactures,  1791. 
b  Hamilton,  MSS.,  vol.  11,  p.  69.     To  John  Chester,  July  21, 
1791. 

[114] 


MANUFACTURES 


summaries  in  his  report  some  idea  of  the  nature 
and  extent  of  manufactures  in  1790  in  this 
country.  Fragmentary  as  the  material  is,  it 
throws  much  light  on  the  economic  question  which 
Hamilton  was  facing.  "The  inquiries  to  which 
the  subject  of  this  report  has  led,"  he  writes  in  his 
report,  "have  been  answered  with  proofs  that 
manufacturies  of  iron,  though  generally  under- 
stood to  be  extensive,  are  far  more  so  than  is 
commonly  supposed."*  A  report,  probably  from 
Providence,  R.  I.,  says  that  nails  are  extensively 
manufactured  and  that  in  1790  4,500  scythes,  axes, 
and  drawing  knives  were  made.b  Among  others 
Hamilton  said  that  there  were  manufactures  of 
implements  and  tools,  stoves  and  household  uten- 
sils, steel  and  iron  work  for  carriages  and  ship- 
building, and  firearms.0  Coppersmiths  and  brass 
founders  were  said  to  be  numerous,  their  chief 
products  being:  copper  and  brass  wires,  utensils, 
andirons  and  philosophical  apparatus/1 

The  most  important  articles  made  from  wood 
were :  ships,  cabinet  wares,  cotton  and  woolen 
cards,  and  coopers'  wares.  "Ships,"  Hamilton 
says,  "are  nowhere  built  in  greater  perfection."* 

a  Works,  vol.  4,  p.  164.    Manufactures,  1791. 

b  Hamilton,  MSS.,  vol.  11,  p.  63. 

c  Works,  vol.  4,  p.  127.     Manufactures,  1791. 

d  Works,  vol.  4,  pp.  127,  169.     Manufactures,  1791. 

e  Works,  vol.  4,  p.  172.     Manufactures,  1791. 

[115] 


ALEXANDER  HAMILTON 


While  it  is  not  desired  to  press  the  point,  the 
following  remark  concerning  our  timber  is  inter- 
esting, especially  in  the  light  of  the  modern  policy 
of  conservation.  "The  increasing  scarcity  and 
growing  importance  of  that  article  (timber)  in 
the  European  countries,"  Hamilton  observes, 
"admonish  the  United  States  to  commence,  and 
systematically  to  pursue,  measures  for  the  pres- 
ervation of  their  stock."* 

Hamilton  also  speaks  of  there  being  manu- 
factures of  gunpowder,  sugar,  flour,  liquors, 
printed  books  and  paper.  "Manufactories  of 
paper,"  he  says,  "are  among  those  which  are 
arrived  at  the  greatest  maturity  in  the  United 
States."b 

Manufactures  of  leather  had  in  1790  reached 
such  a  stage  that  they  could  defy  foreign  competi- 
tion.0 Hides  were  tanned  and  curried,  and  saddles 
and  harness  made.d  A  committee  in  Charleston, 
S.  C.,  sent  in  an  extensive  report  on  leather  manu- 
factures in  that  town.6  Both  glass  and  sailcloth 
manufactures  were  reported.  Sam  Breek  of  Bos- 
ton begins  a  letter  to  Hamilton  as  follows:  "In 
conformity  with  your  wish  it  would  afford  me 

a  Works,  vol.  4,  p.  172.     Manufactures,  1791. 
b  Works,  vol.  4,  p.  190.    Manufactures,  1791. 
c  Works,  vol.  4,  p.  173.     Manufactures,  1791. 
d  Hamilton,  MSS.,  vol.  11,  p.  63.  L.  C. 
e  Hamilton,  MSS.,  vol.  11,  p.  165,  L.  C. 

[116] 


MANUFACTURES 


great  pleasure  to  make  you  acquainted  with  the 
exact  state  of  the  duck  and  glass  manufactures  in 
this  town."a 

Some  attempts  had  been  made  in  growing  the 
mulberry  tree  for  the  purpose  of  raising  the  silk- 
worm.1* From  Morristown,  N.  J.,  however,  came 
the  report  that  silk  manufactures  were  "yet  only 
in  embryo. "c  The  manufacturing  of  lace  was 
carried  on,  upon  a  limited  scale,  in  Ipswich,  Mass.d 

The  most  careful  census  of  cloth  production  in 
families  was  carried  out  by  Drury  Ragsdale,  In- 
spector for  Survey  No.  3,  King  William  Co.,  Va. 
The  actual  returns  from  twenty  families  "compre- 
hending all  classes  from  the  richest  to  the  poorest" 
were : 

Total  number  of  persons  in  families  (including  slaves)  301 
Total  number  of  yards  of  cloth  made  •  •  •  -2914 
Stockings  made  (both  fine  and  coarse),  pairs  •  •  260 
Total  value  of  products £501  2  0 

"It  may  not  be  amiss  to  inform  you,"  Ragsdale 
writes,  "that  it  is  my  opinion  that  the  manufac- 
tures in  my  survey  carried  on  in  private  families 
consist  principally  if  not  altogether  of  cotton  and 
wool,  most  of  the  fine  cloth  is  of  cotton  alone. 

a  Hamilton,  MSS.,  vol.  11,  p.  113,  L.  C.     September  3,  1791. 
b  Hamilton,  MSS.,  vol.  11,  p.  109,  L.  C. 

"Hamilton,  MSS.,  vol.  11,  p.  97,  L.  C.     Conduit  to  Dunham. 
August  25,  1791. 

d  Works,  vol.  4,  p.  189.    Also  MSS.,  vol.  11,  p.  51. 

[117] 


ALEXANDER  HAMILTON 


....  There  being  a  scarcity  of  wool  it  is  generally 
mixed  with  cotton."a 

While  cloth  was  made  generally  in  the  homes 
of  the  people,  promising  beginnings  were  being 
made  in  factory  production.  Hamilton  speaks  of 
Sir  Richard  Arkwright's  invention  of  the  spinning 
frame,b  and  says  that  the  manufactory  at  Provi- 
dence had  the  merit  of  being  the  first  to  introduce 
it  into  the  United  States.0  A  factory  established 
at  Beverly,  Mass.,  for  the  purpose  of  making 
"cotton  goods  of  the  kind  usually  imported  from 
Manchester  for  men's  wear,"  reported  the  fol- 
lowing equipment:  one  carding  engine;  nine  spin- 
ning jennies  of  sixty  to  eighty-four  spindles  each; 
one  doubling  and  twisting  machine;  one  stubbing 
machine;  one  warping  mill;  sixteen  looms  with 
flying  shuttles ;  two  cutting  frames ;  one  burrer  and 
furnace  with  apparatus  to  singe  the  goods;  ap- 
paratus for  coloring,  etc.d 

Hamilton  was  interested  in  the  founding,  by  the 
Society  for  the  Establishment  of  Manufactures, 
of  a  factory  for  the  "making  and  printing  of 
cotton  goods. "e  A  resolution  was  sent  to  him 

a  Hamilton,  MSS.,  vol.  11,  pp.  159,  161,  L.  C.  September 
29,  1791. 

b  Works,  vol.  4,  p.  90.    Manufactures,  1791. 

cWorks,  vol.  4,  p.  186.     Manufactures,  1791. 

d  Hamilton,  MSS.,  vol.  11,  p.  119,  L.  C.  Cabot  to  Hamilton, 
September  6,  1791. 

6  Works,  vol.  4,  p.  182.     Manufactures,  1791. 

[118] 


MANUFACTURES 


signed  by  members  of  the  society,  requesting  him 
"to  procure  and  engage  for  the  service  of  the  so- 
ciety such  artists  and  workmen  as  you  shall  deem 
necessary,  and  upon  such  terms  as  shall  appear  to 
you  reasonable,  for  the  purpose  of  carrying  on  a 
manufactory  of  cotton  in  its  various  branches  and 
printing  the  same."a 

Woolen  goods  also  were  produced  extensively 
"in  a  domestic  way,"  and  essays  were  being  made 
in  factory  production.  The  making  of  hats, 
Hamilton  observed,  had  acquired  maturity.1* 
J.  P.  Cooke  writes  John  Chester  concerning  the 
hat  industry  in  Danbury,  Connecticut.  "The 
manufacturing  of  hats  of  all  kinds,"  he  said  on 
September  12,  1791,  "is  prosecuted  upon  a  large 
scale  in  this  town;  from  the  factory  of  O.  Burr 
and  Company,  which  is  probably  the  largest  of 
the  kind  in  the  state,  large  quantities  of  hats  are 
sent  abroad,  as  also  from  several  others,  although 
to  a  much  less  amount."0  In  1790  O.  Burr  & 
Company  produced  443  felt  hats  at  5/;  9  girls' 
hats  at  7/6;  19  plain  castors  at  24/;  1862  napt 
korums  at  15/5  85  beavers  at  39/5  99  napt  castors 
at  24/.d 

There  was  a  beginning  of  the  fabrication  of 

a  Hamilton,  MSS.,  vol.  11,  p.  83,  L.  C. 
b  Works,  vol.  4,  p.  187.     Manufactures,  1791. 
c  Hamilton,  MSS.,  vol.   11,  p.  128,  L.  C. 
d  Hamilton,  MSS.,  vol.  11,  p.  130,  L.  C. 

[119] 


ALEXANDER  HAMILTON 


cloths,  cassimeres,  and  other  woolens  in  Hartford, 
Connecticut.*  Speaking  of  this  young  industry,  P. 
Colt,  on  July  21,  1791,  writes:  uThis  manu- 
facture commenced  about  three  years  agone  with 

a  capital  of  £1,200 This  stock  being  found 

too  small  to  effect  the  views  of  the  company 
which  was  to  determine  the  question  if  American 
wool  would  make  cloth  equal  to  British  cloths  out 
of  British  wool  and  at  reasonable  prices,  was  ex- 
tended by  new  subscriptions  to  £2,800 The 

legislature,  being  sensible  of  the  importance  of 
encouraging  this  infant  establishment,  granted 
them  a  lottery  to  raise  £i,ooo."b  In  a  town,  prob- 
ably Providence,  the  woolen  manufactures  were 
reported  to  be  limited  because  of  the  scarcity  of 
wool.  "Was  the  raising  of  sheep  duly  en- 
couraged," the  report  says,  ua  sufficient  quantity 
must  be  manufactured  for  the  whole  of  the  inhabi- 
tants."0 Hamilton's  solution  of  the  difficult  prob- 
lem of  encouraging  wool-growing  and  woolen 
manufactures  was  to  grant  premiums  for  the  in- 
crease and  improvement  of  wool  production  and 
to  pay  these  premiums  from  a  fund  raised  by  levy- 
ing a  protective  duty  on  woolen  goods  imported.3 

a  Works,  vol.  4,  p.  187.     Manufactures,  1791. 

b  Hamilton,  MSS.,  vol.  11,  p.  71,  L.  C.  Colt  to  Chester,  July 
21,  1791. 

c  Hamilton,  MSS.,  vol.  11,  p.  63,  L.  C.  Richmond  to 
Wheeler,  October  10,  1791. 

d  Works,  vol.  4,  p.  188.     Manufactures,  1791. 

[120] 


MANUFACTURES 


A  few  interesting  sidelights  were  brought  out 
by  Hamilton's  investigation.  Anselm  Bailey  of 
Surry,  Virginia,  writes  to  T.  Newton  as  follows: 
"Thine  of  the  26th  of  last  mo.  I  received  and  set 
about  with  much  cheerfulness  to  comply  with  thy 
request  but  thou'l  be  perhaps  surprised  at  hearing 
that  most  of  the  people  in  these  parts  have  got  in 
such  a  spirit  of  jealousy  that  they  suspect  some 
design  unfavorable  to  them  in  every  thing  that  is 
attempted  of  a  public  nature.  'What  are  they 
going  to  tax  our  Cloath  too' — was  the  reply  of 
several. "a  Those  acquainted  with  the  appeals  of 
manufacturers  to  Congress  in  recent  years  will  find 
in  one  John  Mix  of  New  Haven,  Connecticut,  an 
ancestral  likeness  whose  face  is  strangely  famil- 
iar. "I  was  not  bread  up,"  John  writes  on  Sep- 
tember 30,  1791,  "to  any  Mechanical  Business, 
but  had  part  of  an  Education  at  Yale  College. 
....  Being  ever  a  friend  and  Supporter  of  the 
Rights  of  my  country  and  finding  agriculture  and 
manufactures  must  be  the  main  Supporters  of  the 
country,  I  applied  my  attention  to  find  out  some 
kind  of  Manufactures  that  had  not  met  with  the 
particular  attention  of  the  Publick. 

"In  September,  1789,  I  accidently  cast  my  eyes 
on  a  particular  hard  metal  button;  after  examina- 
tion of  it  I  was  fully  persuaded  in  my  own  mind 

a  Hamilton,  MSS.,  vol.  11,  p.  93,  L.  C.     August  23,  1791. 
[121] 


ALEXANDER  HAMILTON 


that  I  could  find  out  the  composition  and  that  they 
might  be  made  to  advantage." 

After  describing  his  button  factory  he  continues : 
"We,  therefore,  Earnestly  wish  and  hope  that 
Congress  would  Early  in  their  approaching  Ses- 
sion take  up  the  Matter  with  Spirit  and  resolu- 
tion and  lay  such  heavy  Duties  on  Articles  of  But- 
tons that  it  will  amount  to  a  Prohibition  of  Im- 
porting Buttons  into  this  country.  We  shall  then 
be  able  to  Enlarge  our  Button  factory  in  a  very 
advantageous  and  Extensive  manner  boath  for  the 
Publick  Benefit  and  our  own  Advantage. "a  It  is 
refreshing  after  this  to  rea'd  that  Jonathan  Hill 
of  Providence,  a  manufacturer  of  fringe,  lace,  and 
webbing,  can  make  his  goods  at  a  lower  rate  than 
they  can  be  imported  so  that  he  "wishes  for 
nothing  but  to  be  known. "b 

Many  arguments  were  current  in  Hamilton's 
day  maintaining  that  manufactures  could  not  be 
successfully  established  in  a  country  with  vast 
tracts  of  unoccupied  lands.  "To  all  the  argu- 
ments which  are  brought  to  evince  the  impractica- 
bility of  success  in  manufacturing  establishments 
in  the  United  States,"  Hamilton  answered  with 
the  facts  of  his  investigation  in  mind,  "it  might 
have  been  a  sufficient  answer  to  have  referred  to 

*  Hamilton,  MSS.,  vol.  11,  p.  163,  L.  C.    To  John  Chester. 
b  Hamilton,  MSS.,  vol.  11,  p.  63,  L.  C. 

[122] 


MANUFACTURES 


the  experience  of  what  has  been  already  done."* 
Other  objections  advanced  against  manufactures 
were:  first,  scarcity  and  dearness  of  labor;  second- 
ly, want  of  capital;  thirdly,  the  retarding  effect 
which  they  would  have  on  the  settlement  of  new 
lands. 

Hamilton,  while  admitting  that  the  scarcity  and 
dearness  of  labor  were  real  difficulties,  did  not 
think  that  they  were  insuperable.  "There  are 
large  districts,"  he  observed,  "which  may  be  con- 
sidered as  pretty  fully  peopled;  and  which,  not- 
withstanding a  continual  drain  for  distant  settle- 
ment, are  thickly  interspersed  with  flourishing  and 
increasing  towns. "b  In  such  districts,  he  thought, 
the  complaint  of  scarcity  of  hands  was  on  the  point 
of  ceasing.  The  stock  of  manufacturing  labor 
would  also  be  augmented,  he  said,  by  the  use  which 
could  be  made  of  women  and  children;  by  the  vast 
extension  in  the  improvement  of  machinery;  by 
the  employment  of  persons  engaged  in  other  occu- 
pations during  their  hours  of  leisure;  and  by 
attracting  foreign  immigrants.0  But  he  adds  that 
even  if  labor  is  higher  here  than  in  Europe  "there 
are  grounds  to  conclude  that  undertakers  of  manu- 
factures in  this  country  can,  at  this  time,  afford  to 
pay  higher  wages  to  the  workmen  they  may  em- 

a  Works,  vol.  4,  p.  126.    Manufactures,  1791. 

b  Works,  vol.  4,  p.  108.    Manufactures,  1791. 

c  Works,  vol.  4,  pp.  108,  109.    Manufactures,  1791. 

[123] 


ALEXANDER  HAMILTON 


ploy,  than  are  paid  to  similar  workmen  in 
Europe.'"1 

As  for  capital  Hamilton  thought  that  there 
would  be  no  more  difficulty  in  finding  it  for  im- 
proving manufactures  than  for  developing  agricul- 
ture and  trade.  It  is  an  obvious  truth  he  said  that 
the  "opening  affairs  of  this  rising  country  afford 
profitable  objects  for  more  capital  than  it  has  yet 
acquired.15  But  the  want  of  capital  will  be 
remedied,  he  argued,  by  the  installation  of  banks 
and  by  the  use  of  the  funded  debt  which  we  have 
already  noticed,"0  and  by  the  introduction  of  for- 
eign capital.  It  was  his  belief  that  foreign  capital, 
which  had  already  helped  to  improve  our  means 
of  public  communication,  might  be  expected  to 
assist  in  manufactures. 

While  Hamilton  thought  that  the  conversion  of 
waste  into  cultivated  lands  was  of  great  moment  in 
the  political  calculations  of  the  country,  he  did  not 
regard  it  as  of  primary  importance.  "It  is  mani- 
festly an  error/'  he  remarks,  "to  consider  the  pros- 
perity of  agriculture  as  in  proportion  to  the  quan- 
tity of  land  occupied  or  even  to  the  number  of 
persons  who  occupy  it  or  to  both.  It  is  rather  to 
be  considered  as  in  a  compound  ratio  to  the 

a  Works,  vol.  4,  p.  111.     Manufactures,  1791. 

b  Hamilton,  MS.    Manufactures,  3,  L.  C. 

c  Chapter  Sixth,  pp.  73  and  78. 

d  In  an  early  draft  "political"  reads  "©economical." 

[124] 


MANUFACTURES 


quantity  of  land  occupied  and  the  degree  of  im- 
provement."4 Any  retarding  of  settlement  caused 
by  manufactures  would  be  compensated  for  by 
increase  in  vigor  of  cultivation  and  even  the  num- 
ber engaged  in  agriculture  might  be  increased, 
since  foreigners  attracted  to  this  country  by  manu- 
factures might  later  yield  to  the  temptation  to  take 
up  free  land.b 

The  actual  state  of  manufactures  and  the 
answers  to  the  objections  to  the  further  encourage- 
ment of  them  which  we  have  just  reviewed,  indi- 
cate that  by  1790  both  substantial  beginnings  had 
been  made  in  domestic  and  factory  production  and 
that  the  prospects  were  good  for  their  develop- 
ment. This  condition  had  been  largely  forced 
upon  the  United  States,  first,  by  the  exclusion  of 
foreign  goods  during  the  Revolution,  and  then,  by 
the  policy  of  foreign  nations  which  prevented 
America  from  settling  her  trade  balance  with  the 
products  of  her  soil.  Her  foodstuffs  and  raw 
materials  were  barred  from  foreign  markets  and 
she  could  not  pay  for  her  imports  with  exports. 
Her  only  alternate  was  to  manufacture  for  her- 
self. When  Hamilton  wrote  his  report  he  saw 
this  condition.  "If  Europe,"  he  says,  "will  not 
take  from  us  the  products  of  our  soil,  upon  terms 
consistent  with  our  interest,  the  natural  remedy 

a  Hamilton,  MS.    Manufactures,  1,  L.  C. 
b  Works,  vol.  4,  p  103.    Manufactures,  1791. 

[125] 


ALEXANDER  HAMILTON 


is  to  contract,  as  fast  as  possible,  our  wants  of 
her."* 

Writers  have  observed  that  Hamilton's  sug- 
gestions on  manufactures  were  not,  as  they  were  in 
the  case  of  his  other  reports,  immediately  fol- 
lowed, and  that  they  were  not  even  urged  by  him 
again.  The  explanation  is  not  far  to  seek. 
During  the  year  following  the  publication  of  the 
Report  on  Manufactures  war  broke  out  between 
France  and  the  First  Coalition,  and  from  that  time 
until  Waterloo  Europe  was  in  an  almost  continu- 
ous state  of  hostility.  The  markets  which  before 
America  had  been  refused  were  now  thrown  open 
to  her,  and  under  her  cherished  policy  of  neu- 
trality she  reaped  a  rich  harvest  in  trade.  The 
immediate  need  for  diversifying  industry  was  re- 
moved. Hamilton  himself  turned  his  energies, 
from  necessity,  to  questions  of  foreign  policy  and 
international  law.  He  probably,  however,  felt 
that  the  conditions  forced  upon  us  were  unfortu- 
nate since  they  perpetuated  the  colonial  economy, 
and  were,  therefore,  anti-national.  He  believed 
that  it  was  "most  wise  for  us  to  depend  as  little 
as  possible  upon  European  caprice,  and  to  exert 
ourselves  to  the  utmost  to  unfold  and  improve 
every  domestic  resource. "b 

*  Works,  vol.  4,  p.  102.    Manufactures,  1791. 

b  Works,  vol.  9,  p.  484.     To  Goodhue,  June  30,  1791. 

[126] 


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A  PAGE  FROM  AN  EARLY  DRAFT  OF  HAMILTON'S  REPORT  ON 
MANUFACTURES,  SHOWING  REFERENCE  to  "WEALTH 

OF  NATIONS,"  IN  His  HANDWRITING 
(Page  219  probably  intended  to  refer  to  page  229) 


CHAPTER  NINTH 

PROTECTION 

In  the  Library  of  Congress  there  are  three 
more  or  less  complete  preliminary  drafts  and  the 
final  draft  of  Hamilton's  Report  on  Manufactures 
which  he  submitted  to  Congress  December  5, 
1791.  Drafts  one,  two,  and  final  are  in  his  own 
handwriting;  the  third  was  copied  by  a  clerk. 
Hamilton  wrote  this  report  during  very  busy 
times,  and  for  this  reason  even  the  final  draft  is 
somewhat  disconnected  and  rambling;  but  the 
manuscripts  show  many  revisions  and  additions. 
It  is  clear  from  the  text  itself  that  he  had  before 
him  at  the  time  of  writing  a  copy  of  Adam  Smith's 
Wealth  of  Nations.  Conclusive  evidence  of  the 
fact,  however,  is  found  in  the  reference,  "Smith, 
W.  of  Nations,  vol.  i,  p.  2i9,"a  which  appears  on 
an  early  draft  of  the  report  but  which  was  subse- 
quently scratched  out. 

Prior  to  the  writing  of  the  Report  on  Manu- 
factures five  editions  of  the  Wealth  of  Nations  had 
appeared  in  England.b  They  were  published  in 
1776,  1778,  1784,  1786,  and  1789,  respectively. 

a  See  photograph  of  manuscript  on  opposite  page.  "P.  219"  is 
probably  a  slip  of  the  pen  and  intended  for  p.  229  of  the  third 
English  edition  (1784). 

b  The  sixth  edition  is  dated  1791,  the  year  in  which  the  Report 
on  Manufactures  was  published. 

[127] 


ALEXANDER  HAMILTON 


It  was  enough  in  demand  in  this  country  by  1789 
that  an  American  edition  was  put  out  by  a  Phila- 
delphia publisher.  When  Hamilton  came  to  con- 
sider the  question  of  manufactures,  he  found  that 
public  men  were  generally  acquainted  with  its 
principles  of  freedom  in  trade  and  industry,  and 
he,  therefore,  thought  it  advisable  to  state  and 
answer  them  fully  in  his  report. 

"To  endeavor,"  Hamilton  says  in  stating  the 
position  of  the  school  of  Smith,  uTo  endeavor,  by 
the  extraordinary  patronage  of  government,  to 
accelerate  the  growth  of  manufactures,  is,  in  fact, 
to  endeavor,  by  force  and  art,  to  transfer  the 
natural  current  of  industry  from  the  more  to  a 

less  beneficial  channel It  can  hardly  ever  be 

wise  in  a  government  to  attempt  to  give  a  direc- 
tion to  the  industry  of  its  citizens.  This,  under  the 
quick-sighted  guidance  of  private  interest,  will,  if 
left  to  itself,  infallibly  find  its  own  way  to  the  most 
profitable  employment;  and  it  is  by  such  employ- 
ment, that  the  public  prosperity  will  be  most  effec- 
tually promoted 

"This  policy  is  not  only  recommended  to  the 
United  States,  by  considerations  which  affect  all 
nations;  it  is,  in  a  manner,  dictated  to  them  by  the 
imperious  force  of  a  very  peculiar  situation.  The 
smallness  of  their  population  compared  with  their 
territory;  the  constant  allurements  to  emigration 
from  the  settled  to  the  unsettled  parts  of  the 

[128] 


PROTECTION 


country ;  the  facility  with  which  the  less  independ- 
ent condition  of  an  artisan  can  be  exchanged  for 
the  more  independent  condition  of  a  farmer: — 
these,  and  similar  causes,  conspire  to  produce,  and 
for  a  length  of  time  must  continue  to  occasion,  a 
scarcity  of  hands  for  manufacturing  occupation, 
and  dearness  of  labor  generally."* 

Hamilton  saw  very  clearly  the  value  of  Smith's 
philosophy  of  freedom  and  that,  as  a  protest 
against  too  much  regulation,  it  had  every  right  to 
be  respected.  The  following  appreciations  of  it 
are  taken  from  different  drafts  of  his  report: 

a  Works,  vol.  4,  pp.  71,  72.     Cf.  Works,  vol.  4,  p.  104.    Also 
Smith,  A.,  Wealth  of  Nations,  Book  3,  ch.  1,  and  Book  4,  ch.  9. 


[129] 


ALEXANDER  HAMILTON 


"This  theory  has  so 
much  of  truth  in  it 
that  its  principles 
ought  never  to  be  out 
of  the  view  of  the 
legislators  of  this 
country.  And  while 
its  extremes  ought  to 
be  qualified  in  practice 
by  the  exceptions  to 
which  every  general 
theory  is  subject,  its 
maxims  ought  to  serve 
as  cautions  against  all 
extremes  of  any  other 
kind.  If  they  do  not 
persuade  that  all  legis- 
lative countenance 
ought  to  be  withheld 
from  particular 
branches  of  industry 
which  appear  to  stand 
in  need  of  it,  they 
ought  at  least  to  incul- 
cate that  it  should  be 
afforded  with  modera- 
tion and  measure,  that 
the  real  aptitudes  in 
the  state  of  things  for 
particular  improve- 
ments and  ameliora- 
tions should  be  care- 
fully consulted,  and 
that  they  should  be 
developed  by  gradual, 
systematic  and  pro- 
gressive efforts  rather 
than  forced  into  ma- 
turity by  violent  and 
disproportioned  exer- 
tions, "a 


"There  is  so  much 
of  truth  in  these  posi- 
tions that  an  attentive 
eye  ought  to  be  had  to 
them  in  every  step  of 
our  progress  toward 
the  attainment  of 
manufactures.  But 
though  they  are  very 
proper  considerations 
to  moderate,  they  are 
not  such  as  ought  to 
extinguish  a  zeal  for 
manufactures.  All 
political  theories,  how- 
ever true  in  the  main, 
become  pernicious 
when  pushed  to  an  ex- 
treme. They  all  admit 
of  numerous  excep- 
tions and  qualifica- 
tions; in  discerning 
which  the  wisdom  of 
government  is  mani- 
fest, "b 


"This  mode  of  rea- 
soning is  founded  up- 
on facts  and  principles 
which  have  certainly 
respectable  preten 
sions.  If  it  had  gov- 
erned the  conduct  of 
nations  more  gener- 
ally than  it  has  done, 
there  is  room  to  sup- 
pose that  it  might 
have  carried  them 
faster  to  prosperity 
and  greatness  than 
they  have  attained  by 
the  pursuit  of  maxims 
too  widely  opposite. 
Most  general  theories, 
however,  admit  of 
numerous  exceptions, 
and  there  are  few,  if 
any,  of  the  political 
kind,  which  do  not 
blend  a  considerable 
portion  of  error  with 
the  truths  they  incul- 
cate.'^ 


a  Hamilton,  MS.  Manufactures,  1,  L.  C. 
b  Hamilton,  MS.  Manufactures,  3,  L.  C. 
c  Works,  vol.  4,  p.  73.  Manufactures,  1791. 

[130] 


PROTECTION 


Hamilton  now  advances  several  positive  argu- 
ments against  the  tenets  of  Smith.  It  was  neces- 
sary, in  order  to  make  his  system  of  liberty  work, 
for  Smith  to  assume  perfect  mobility  of  labor  and 
capital;  but  Hamilton  was  quick  to  see  that  this 
assumption  was  not  warranted  by  the  facts  of 
human  nature.  It  disregarded  entirely  the  psy- 
chological factors  in  the  equation;  such  as  habit, 
the  spirit  of  imitation,  and  the  fear  of  want  of 
success  in  untried  enterprises.  "Experience,"  he 
says,  "teaches  that  men  are  often  so  much  gov- 
erned by  what  they  are  accustomed  to  see  and 
practice,  that  the  simplest  and  most  obvious  im- 
provements, in  the  most  ordinary  occupations,  are 
adopted  with  hesitation,  reluctance,  and  by  slow 
gradations."*  Men  will,  in  fact,  often  adhere  to 
ancient  courses  as  long  as  they  may  obtain  from 
them  bare  subsistence.  "The  apprehension  of 
failing  in  new  attempts,"  he  continues,  "is,  per- 
haps, a  more  serious  impediment."1*  Cautious 
capitalists  are  not  likely  to  undertake  new  and 
precarious  undertakings  unless  government  inter- 
vene to  remove  some  of  the  obstacles. 

The  doctrine  of  Adam  Smith,  furthermore,  dis- 
regards the  existence  of  nations;  his  theory  might 
have  worked  in  a  world  without  national  bound- 
aries, national  traditions,  and  national  desires,  but 

a  Works,  vol.  4,  p.  104.     Manufactures,  1791. 
b  Works,  vol.  4,  p.  105.     Manufactures,  1791. 

[131] 


ALEXANDER  HAMILTON 


these  to  the  mind  of  Hamilton  involved,  not  only 
facts  to  be  recognized,  but  also  principles  to  be 
cherished.  His  chief  concern  was  the  collective 
interest  of  the  American  nation.  uTo  maintain," 
he  said,  "between  the  recent  establishments  of  one 
country,  and  the  long-matured  establishments  of 
another  country,  a  competition  upon  equal  terms, 
both  as  to  quality  and  price,  is,  in  most  cases,  im- 
practicable."a  A  society,  therefore,  which  might 
be  ready  for  manufactures  according  to  the  sys- 
tem of  perfect  liberty  would  be  hindered,  by  un- 
equal competition,  from  diversifying  its  industry. 
Another  impediment  to  the  establishment  of  new 
industries  is  the  policy  of  foreign  nations  of  grant- 
ing bounties,  premiums,  and  other  aids  "to  enable 
their  own  workmen  to  undersell  and  supplant  all 
competitors  in  the  countries  to  which  those  com- 
modities are  sent."b  Combinations  of  foreign 
manufacturers,  Hamilton  also  thought,  existed 
whose  purpose  it  was  to  frustrate,  by  temporary 
sacrifices,  the  introduction  of  new  industries  in 
countries  which  were  their  markets.0  "Whatever 
room  there  may  be  for  an  expectation  that  the 
industry  of  a  people,  under  the  direction  of  private 
interest,  will,  upon  equal  terms,  find  out  the  most 
beneficial  employment  for  itself,"  he  remarks  in 

a  Works,  vol.  4,  pp.  105,  106.    Manufactures,  1791. 

b  Works,  vol.  4,  p.  106.    Manufactures,  1791. 

c  Works,  vol.  4,  pp.  106,  107.    Manufactures,  1791. 

[132] 


PROTECTION 


conclusion,  "there  is  none  for  a  reliance  that  it  will 
struggle  against  the  force  of  unequal  terms,  or 
will,  of  itself,  surmount  all  the  adventitious  bar- 
riers to  a  successful  competition  which  may  have 
been  erected  either  by  the  advantages  naturally 
acquired  from  practice  and  previous  possession  of 
the  ground,  or  by  those  which  may  have  sprung 
from  positive  regulations  and  an  artificial  policy."* 
Hamilton  looked  at  the  advice  of  Adam  Smith 
to  the  statesman  in  two  ways:  he  thought,  in  the 
first  place,  that  because  of  the  reluctance  of 
human  nature  and  national  aspirations,  it  would 
not  work;  that  it  would  not  achieve  the  results 
promised;  he  thought,  secondly,  that,  even  if  it 
did  work,  the  form  of  society  it  would  produce 
was  undesirable  because  it  overlooked  the  interests 
and  power  of  particular  nations.  Hamilton  was, 
in  fact,  not  an  individualist.  No  book  has  thrown 
so  much  light  on  the  motives  and  beliefs  of  Hamil- 
ton as  did  the  recent  work  of  F.  S.  Oliver.  This 
book,  begun  as  an  essay  on  Joseph  Chamberlain's 
policy  of  preference,  expanded  into  a  political  and 
economic  study  of  Hamilton.  Its  most  extraor- 
dinary popularity  shows  not  only  its  literary 
power,  but  also  the  renewal  of  interest  in  Hamil- 
ton and  the  principles  of  nationalism.  It  is  valu- 
able not  so  much  for  its  facts  as  for  its  study  of 
forces  back  of  facts.  Whatever  its  defects  as 

a  Works,  vol.  4,  p.  107.    Manufactures,  1791. 
[133] 


ALEXANDER  HAMILTON 


history  may  be,  its  position  is  secure  as  a  sympa- 
thetic interpretation  of  a  political  philosophy 
which  has  held  the  allegiance  of  at  least  some  of 
the  most  powerful  of  the  world's  thinkers  and 
statesmen. 

Hamilton's  argument  for  protection  might  be 
stated  in  brief  as  follows :  National  diversification 
of  industry  increases  the  power  and  wealth  of  the 
nation;  such  measures,  therefore,  as  will  effect 
this  object  should  be  adopted  and  pursued.  We 
may  consider  his  arguments  at  more  length  under 
these  heads:  home-market;  self-sufficiency;  and 
productivity. 

The  home-market  argument  for  protection  was 
addressed  by  Hamilton  to  the  agriculturists  who 
constituted  by  far  the  most  numerous  class  in 
America.  Manufactures,  he  says,  by  creating,  in 
some  instances,  a  new,  and  securing,  in  all,  a  more 
certain  and  steady  demand  for  the  surplus  produce 
of  the  soil,  contribute  to  an  augmentation  of  the 
produce  or  revenue  of  a  country,  and  have  an 
immediate  and  direct  relation  to  the  prosperity  of 
agriculture.11  "It  is  evident,"  he  continues,  "that 
the  exertions  of  the  husbandman  will  be  steady  or 
fluctuating,  vigorous  or  feeble,  in  proportion  to 
the  steadiness  or  fluctuation,  adequateness  or  in- 
adequateness,  of  the  markets  on  which  he  must 
depend  for  the  vent  of  the  surplus  which  may  be 

a  Works,  vol.  4,  p.  95.     Manufactures,  1791. 
[134] 


,•**- 


PART  OF  WASHINGTON'S  LETTER  TO  HAMILTON  WHEN  HE  RETIRED 
FROM  THE  OFFICE  OF  SECRETARY  OF  THE  TREASURY 


PROTECTION 


produced  by  his  labor."a  When  Hamilton  con- 
sidered the  policy  of  self-sufficiency  and  exclusion 
pursued  by  foreign  nations;  the  casual  and  occa- 
sional demand  for  the  produce  of  our  soil;  the 
danger  of  a  glut  of  produce  in  our  markets;  the 
probable  progressive  settlement  of  the  West ;  and 
the  need  of  developing  the  vast,  unexploited  re- 
sources of  the  nation : — when  he  considered  these, 
he  was  convinced  that  an  extensive  domestic 
market  was  necessary  to  our  prosperity.  "To 
secure  such  a  market,"  he  concludes,  "there  is  no 
other  expedient  than  to  promote  manufacturing 
establishments."15 

That  every  class  and  every  sectional  interest 
within  the  nation  was  unequivocally  bound  up  with 
the  national  interest  was  a  fundamental  maxim  of 
Hamilton's  creed.  Antagonisms  within  the  nation 
he  regarded  as  superficial  and  due  to  the  inability 
of  people  to  comprehend  their  welfare  as  a  whole. 
"The  aggregate  prosperity  of  manufactures  and 
the  aggregate  prosperity  of  agriculture,"  he  says, 
"are  intimately  connected."6  Manufactures  pro- 
mote a  vigorous  and  more  steady  cultivation  of 
the  soil,  and,  even  if  they  do  abridge  the  rapid 
settlement  of  lands,  the  land-owning  class  is  reim- 

_  a  Works,  vol.  4,  p.  95.  Manufactures,  1791. 
b  Works,  vol.  4,  p.  97.  Manufactures,  1791. 
c  Works,  vol.  4,  p.  139.  Manufactures,  1791. 

[135] 


ALEXANDER  HAMILTON 


bursed  by  an  increase  both  in  the  capital  value  and 
the  income  of  its  land.a 

Hamilton  found  the  most  insistent  opposition 
to  manufactures  coming  from  the  South.  Since 
that  section  could  not  develop  them  under  the 
regime  of  slavery,  it  regarded  their  encourage- 
ment in  the  North  as  sectional  legislation  opposed 
to  their  interests.  This  opinion  Hamilton  de- 
plored. "Ideas  of  a  contrariety  of  interests  be- 
tween the  Northern  and  Southern  regions  of  the 
Union/'  he  said,  "are,  in  the  main,  as  unfounded 
as  they  are  mischievous.  The  diversity  of  circum- 
stances, on  which  such  contrariety  is  usually  pred- 
icated, authorizes  a  directly  contrary  conclusion. 
Mutual  wants  constitute  one  of  the  strongest  links 
of  political  connection;  and  the  extent  of  these 
bears  a  natural  proportion  to  the  diversity  in  the 
means  of  mutual  supply."b  The  Socialist  believes 
that  there  is  a  "gigantic  struggle  between  capital- 
ism and  landed  property,  between  profits  and  land 
rent,"0  but  from  the  nationalist's  point  of  view 
these  interests  are  complementary.  Hamilton  re- 
garded the  cooperation  of  the  agricultural  and 
manufacturing  interests  as  not  only  necessary  to 
the  power  and  opulence  of  the  nation,  but  as  bene- 

a  Works,  vol.  4,  p.  103.    Manufactures,  1791. 
b  Works,  vol.  4,  p.  139.    Manufactures,  1791. 
c  Rabbeno,  U.,  Protezionisrao  Americano,  Essay  2,  ch.  7,  sec. 
63. 

[136] 


PROTECTION 


ficial  to  the  cooperating  classes  and  individuals. 
It  was  his  belief  that  there  was  an  "intimate  con- 
nection of  interest  which  subsists  between  all  the 
parts  of  a  society  united  under  the  same  govern- 
ment.'"1 

In  the  comprehensiveness  of  his  appeal  Hamil- 
ton did  not  forget  the  fishing  interests.  "As  far 
as  the  prosperity  of  the  fisheries  of  the  United 
States,"  he  said,  "is  impeded  by  the  want  of  an 
adequate  market,  there  arises  another  special 
reason  for  desiring  the  extension  of  manufac- 
tures."b 

While  Hamilton  desired  economic  independ- 
ence for  the  American  nation,  he  was  hopeful  that 
this  country  by  producing  a  great  variety  of  goods 
would  become  an  extensive,  diversified  market  in 
which  foreigners  would  supply  their  needs. 
"Another  circumstance,"  he  observed,  "which 
gives  a  superiority  of  commercial  advantages  to 
states  that  manufacture  as  well  as  cultivate,  con- 
sists in  the  more  numerous  attractions  which  a 
more  diversified  market  offers  to  foreign  cus- 
tomers, and  in  the  greater  scope  which  it  affords 
to  mercantile  enterprise."0 

Hamilton's  home-market  argument,  then,  falls 
naturally  into  three  parts:  manufactures,  in  the 

a  Works,  vol.  4,  p.  140.  Manufactures,  1791. 
b  Works,  vol.  4,  p.  138.  Manufactures,  1791. 
c  Works,  vol.  4,  p.  132.  Manufactures,  1791. 

[137] 


ALEXANDER  HAMILTON 


first  place,  by  furnishing  a  steady  and  near  market 
for  raw  materials  and  foodstuffs,  would  encourage 
both  the  intensive  and  extensive  cultivation  of  the 
soil ;  they,  secondly,  by  making  the  sections  of  the 
country  mutually  dependent,  would  cement  more 
closely  the  Union  of  States;  and  they,  thirdly,  by 
diversifying  the  articles  of  national  production, 
would  prevent  stagnation  in  our  markets  and 
attract  foreigners  to  our  shores  to  buy. 

In  selecting  the  industries  which  he  believed 
worthy  of  protection,  Hamilton  took  into  con- 
sideration, among  other  interests,  "particularly 
the  great  one  of  national  defence. "a  For  the  sake 
of  national  strength  and  independence,  he  desired 
that  the  United  States  should  abridge  its  wants  of 
other  nations,  and  that  because  of  the  uncertain- 
ties of  international  trade  and  the  possibilities  of 
war,  it  should  aim  at  self-sufficiency.  "Not  only 
the  wealth,"  he  says,  ubut  the  independence  and 
security  of  a  country  appear  to  be  materially  con- 
nected with  the  prosperity  of  manufactures. 
Every  nation,  with  a  view  to  those  great  objects, 
ought  to  endeavor  to  possess  within  itself  all  the 
essentials  of  national  supply.  These  comprise  the 
means  of  subsistence,  habitation,  clothing,  and 
defence. "b  In  Hamilton's  day  the  safety,  if  not 
the  existence,  of  a  political  society  depended  on  its 

a  Works,  vol.  4,  p.  163.    Manufactures,  1791. 
b  Works,  vol.  4,  p.  135.     Manufactures,  1791. 

[138] 


PROTECTION 


ability  to  obtain  adequate  supplies.  The  embar- 
rassment of  the  United  States  during  the  Revo- 
lutionary War,  from  an  incapacity  of  supplying 
its  needs,  was  remembered,  as  a  warning,  by  Ham- 
ilton; and  he  urged  that  timely  and  vigorous 
measures  be  taken  to  prevent  its  recurrence  in  case 
of  future  war.a  He  thought  that  we  ought  not  to 
depend  on  foreign  supply  because  it  was  precarious 
and  liable  to  be  interrupted.13  uThe  want  of  a 
navy,"  he  observed,  "to  protect  our  external  com- 
merce as  long  as  it  shall  continue,  must  render  it  a 
peculiarly  precarious  reliance  for  the  supply  of 
essential  articles,  and  must  serve  to  strengthen 
prodigiously  the  arguments  in  favor  of  manufac- 
tures."0 National  self-sufficiency  was  to  him  a 
policy  demanded  by  expediency  and  practical  poli- 
tics. In  an  age  when  nations  were  neither  asking 
nor  giving  quarter;  when  the  weak  were  the  prey 
of  the  strong;  when  retaliation,  navigation  laws, 
and  war  were  chessmen  in  the  international  game 
of  national  greatness;  the  strength,  if  not  the 
safety,  of  the  American  nation,  Hamilton  main- 
tained, depended  on  abridging  our  needs  of  other 
powers. 

Economists  have  generally  conceded  that  under 
certain  conditions  a  nation  might  be  justified,  for 

a  Works,  vol.  4,  p.  136.     Manufactures,  1791. 

b  Works,  vol.  8,  p.  222.     Speech,  1796. 

c  Works,  vol.  4,  p.  136.    Manufactures,  1791. 

[139] 


ALEXANDER  HAMILTON 


the  sake  of  self-sufficiency,  in  diversifying  its  in- 
dustry. But  they  usually  add  that  the  nation 
which  does  it,  sacrifices  wealth  to  defence.  Ham- 
ilton did  not  think  so.  Self-sufficiency  was  to  him, 
in  fact,  incidental,  or  perhaps,  self-evident;  he 
believed  that  protection  was  primarily  a  means  of 
increasing  the  power  of  the  nation  to  produce 
wealth.  The  theory  of  "productive  powers"  is 
generally  ascribed  to  Friedrich  List.  List  was 
born  at  Reutlingen,  Wurtemberg,  August  6, 
1789.  Because  of  political  persecution,  he  came 
to  America  in  1825,  and  remained  five  years.  He 
immediately  interested  himself  in  the  "Pennsyl- 
vania Society  for  the  Promotion  of  Manufactures 
and  the  Mechanical  Arts" — a  society  founded  by 
Hamilton.  This  society  republished  in  1824,  with 
a  preface  by  its  president,  Matthew  Carey,  Ham- 
ilton's Report  on  Manufactures.  A  second  edi- 
tion appeared  in  1827.*  In  this  same  year  List 
wrote  a  series  of  letters  to  C.  J.  Ingersoll,  Vice 
President  of  the  Philadelphia  Society,  which  were 
published  under  the  title,  "Outlines  of  American 
Political  Economy." 

Rabbeno  has  pointed  out  that  before  landing  in 
America  List  had  not  formulated  his  theory  of 
protection  and  also  that  all  the  essential  ideas 
which  appear  in  his  work  of  1841  are  to  be  found 

*  Hirst,  M.  E.,  Life  of  Friedrich  List,  p.  115. 
[140] 


PROTECTION 


in  the  "Outlines"  of  1827.*  Although  List  gives 
no  credit  in  any  of  his  writings  to  Hamilton's 
famous  report,  it  seems  impossible  to  escape  the 
conclusion  that  he  found  in  it  the  general  prin- 
ciples which  he  developed  into  his  theory  of  nation- 
ality and  productive  powers.b 

"National  economy,"  List  says,  "teaches  by 
what  means  a  certain  nation,  in  her  particular 
situation,  may  direct  and  regulate  the  economy  of 
individuals,  and  restrict  the  economy  of  mankind, 
either  to  prevent  foreign  restrictions  and  foreign 
power,  or  to  increase  the  productive  powers 
within  herself."0  The  object  of  political  economy, 
he  thought,  was  not  to  gain  matter  in  exchanging 
matter  for  matter,  but  to  gain  productive  and 
political  power.  "There  are,"  he  says,  "a  capital 
of  nature,  a  capital  of  mind,  and  a  capital  of  pro- 
ductive matter,  and  the  productive  powers  of  a 
nation  depend  not  only  upon  the  latter,  but  also 
and  principally  upon  the  two  former."d 

America  was  in  Hamilton's  day  a  vast  unde- 
veloped estate;  rich  in  latent  resources  but  poor 
in  productive  powers.  The  economic  organiza- 
tion was  weak  because  simple.  The  most  direct 

a  Rabbeno,  U.,  Protezionismo  Americano,  Essay  3,  ch.  2,  sec. 
23. 

b  Callender,  G.  S.,  Economic  History  of  the  United  States,  p. 
552n. 

cList,  F.,  Outlines.    Letter  1. 

d  List,  F.,  Outlines.    Letter  4. 

[141] 


ALEXANDER  HAMILTON 


and  obvious  way  in  which  manufactures  would 
increase  production  in  an  agricultural  society, 
Hamilton  pointed  out,  were :  first,  by  the  extension 
of  the  use  of  machinery;  machinery  which  is  an 
"artificial  force  brought  in  aid  of  the  natural 
force  of  man"  would  increase  the  mass  of  national 
industry.  In  the  second  place,  manufactures 
would  afford  "occasional  and  extra  employment  to 
industrious  individuals  and  families,  who  are  will- 
ing to  devote  the  leisure  resulting  from  the  inter- 
missions of  their  ordinary  pursuits  to  collateral 
labors";*  and  give  employment  to  persons  dis- 
qualified by  bias  of  temper  or  infirmity  of  body 
from  work  in  agriculture.  In  the  third  place, 
manufactures  would  increase  the  quantity  of  labor 
in  the  nation  by  attracting  foreign  immigrants. 
"Men,"  Hamilton  says,  "reluctantly  quit  one 
course  of  occupation  and  livelihood  for  another, 
unless  invited  to  it  by  very  apparent  and  proximate 
advantages."11  But  those,  unwilling  to  migrate  in 
order  to  become  farmers,  would  come  to  America 
if  they  had  prospects  of  continuing  in  their  chosen 
calling.  "The  disturbed  state  of  Europe,"  Ham- 
ilton writes  in  1791,  "inclining  its  citizens  to  emi- 
gration, the  requisite  workmen  will  be  more  easily 
acquired  than  at  another  time;  and  the  effect  of 
multiplying  the  opportunities  of  employment  to 

a  Works,  vol.  4,  p.  91.    Manufactures,  1791. 
b  Works,  vol.  4,  p.  92.     Manufactures,  1791. 

[142] 


PROTECTION 


those  who  emigrate,  may  be  an  increase  of  the 
number  and  extent  of  valuable  acquisitions  to  the 
population,  arts,  and  industry  of  the  country.  To 
find  pleasure  in  the  calamities  of  other  nations 
would  be  criminal;  but  to  benefit  ourselves,  by 
opening  an  asylum  to  those  who  suffer  in  conse- 
quence of  them,  is  as  justifiable  as  it  is  politic."* 

In  a  nation,  as  in  a  factory,  there  is  a  maximum 
of  productiveness.  Hamilton  believed  that  it  is 
the  statesman's,  as  it  is  the  entrepreneur's,  duty 
to  regulate  the  division  of  labor  so  that  the  maxi- 
mum product  will  be  produced.  His  arguments 
for  national  division  of  labor  are  taken  sub- 
stantially from  the  "Wealth  of  Nations" — the 
difference  being  that,  while  Smith  lays  emphasis 
on  division  of  labor  within  a  manufactory,  such  as 
his  pin  factory,  or  on  international  division  of 
labor,  Hamilton  emphasizes  division  of  labor 
within  the  nation.  "There  is  scarcely  any  thing 
of  greater  moment  in  the  economy  of  a  nation," 
he  says,  "than  the  proper  division  of  labor.  The 
separation  of  occupations  causes  each  to  be  carried 
to  a  much  greater  perfection  than  it  could  possibly 
acquire  if  they  were  blended."b  Hamilton  then 
gives  Adam  Smith's  three  famous  arguments  for 
division  of  labor.  Greater  skill  and  dexterity,  in 
the  first  place,  naturally  results  from  a  constant 

a  Works,  vol.  4,  p.  143.    Manufactures,  1791. 
b  Works,  vol.  4,  pp.  87,  88.    Manufactures,  1791. 

[143] 


ALEXANDER  HAMILTON 


and  undivided  application  to  a  single  object. a  The 
cultivator,  in  a  country  which  has  manufactures, 
since  he  does  not  have  to  make  his  own  implements 
and  manufactured  goods,  can  give  his  undivided 
attention  to  the  tillage  of  the  soil.  By  furnishing 
food  and  raw  materials,  on  the  contrary,  to  the 
manufacturer,  the  farmer  allows  him  to  perfect 
his  processes  and  develop  his  skill.  Division  of 
labor,  secondly,  economizes  time  by  avoiding  the 
loss  of  it  "incident  to  a  frequent  transition  from 
one  operation  to  another."b  Time  is  lost  in  the 
transition  itself,  in  the  orderly  disposition  of  im- 
plements, machinery,  and  materials,  in  the  "inter- 
ruption  of  the  impulse  which  the  mind  of  the  work- 
man acquires  from  being  engaged  in  a  particular 
operation,"  and  in  the  "distractions,  hesitations, 
and  reluctances  which  attend  the  passage  from  one 
kind  of  business  to  another."  National  division 
of  labor,  finally,  leads  to  the  improvement  of 
machinery.0  A  man  employed  on  a  single  object 
will  be  led  to  exert  his  imagination  "in  devising 
methods  to  facilitate  and  abridge  labor." 
Another  result  will  be  that  the  fabrication  of 
machines  will  become  a  distinct  trade  and  the  in- 

a  Works,  vol.  4,  p.  88.  Cf.  Wealth  of  Nations,  Book  1,  ch.  1, 
vol.  1,  p.  9. 

b  Ibid. 

c  Works,  vol.  4,  pp.  88,  89.  Cf.  Wealth  of  Nations,  Book  1, 
ch.  1,  vol.  1,  pp.  10,  11. 

[144] 


PROTECTION 


vention  and  application  of  machinery  will  be  ex- 
tended. "The  mere  separation  of  the  occupation 
of  the  cultivator  from  that  of  the  artificer,"  Hamil- 
ton concludes,  uhas  the  effect  of  augmenting  the 
productive  powers  of  labor,  and  with  them,  the 
total  mass  of  the  produce  and  revenue  of  a 
country."a 

Adam  Smith  and  his  school  seem  to  disregard 
entirely  the  immaterial  and  mental  factors  in  the 
equation  of  production,  and  to  maintain  that  the 
industry  of  a  country  is  always  in  proportion  to 
the  quantity  of  its  labor  and  capital.b  If  it  be  true 
that  the  confidence  and  enterprise  of  the  people 
does  not  effect  production,  it  is,  then,  obvious  that 
any  regulation  which  diverts  labor  and  capital 
from  a  more  to  a  less  productive  industry  destroys 
national  wealth;  if,  on  the  contrary,  the  psycho- 
logical factors  have  a  bearing  on  production,  the 
question  becomes :  In  what  form  of  society  are 
the  largest  number  of  human  talents  brought  into 
play  and  the  greatest  quantity  of  activity  stimu- 
lated? Hamilton's  answer  to  this  question  was: 
In  a  society  where  the  objects  of  industry  are  most 
diversified. 

"It  is  a  just  observation,"  Hamilton  remarks, 
"that  minds  of  the  strongest  and  most  active 
powers  for  their  proper  objects,  fall  below  me- 

*  Works,  vol.  4,  p.  89. 

bCf.  Wealth  of  Nations,  Book  4,  ch.  2,  vol.  1,  pp.  422,  423. 

[145] 


ALEXANDER  HAMILTON 


diocrity,  and  labor  without  effect,  if  confined  to  un- 
congenial pursuits. "a  It  was  his  idea  that  in  a 
homogeneous  society,  such  as  America  was  in  his 
day,  a  large  amount  of  talent  goes  to  waste 
because  it  has  no  object  to  which  to  apply  itself. 
Since  men  have  diversity  of  talents  and  disposi- 
tions, he  desired  that  opportunities  in  industry  be 
coextensive  with  them.  "When  it  is  considered 
....,"  he  wrote  in  one  of  the  manuscript  drafts 
of  his  report,  "that  the  results  of  human  enter- 
prise and  exertion  are  immensely  augmented  by 
the  diversification  of  their  objects;  that  there  is  a 
reciprocal  reaction  of  the  various  species  of  in- 
dustry upon  each  other  mutually  beneficial,  and 
conducive  to  general  prosperity,  it  must  appear 
probable  that  the  interests  of  a  community  will  be 
most  effectually  promoted  by  diversifying  the  in- 
dustrious pursuits  of  its  members  and  by  regulat- 
ing the  political  economy  so  that  those  who  have 
been  particularly  qualified  by  nature  for  arts  and 
manufactures  may  find  the  encouragement  neces- 
sary to  call  forth  and  reward  their  peculiar 
talents."" 

The  effect  of  enlarging  the  field  of  enterprise 
had  the  same  effect  on  the  industry  of  a  people, 
Hamilton  believed,  as  the  "discovery  of  some  new 

a  Works,  vol.  4,  p.  93.    Manufactures,  1791. 
b  Hamilton,  MS.     Manufactures,  3,  L.  C. 

[146] 


PROTECTION 


power  in  mechanics";*  it  harnessed  and  made 
available  powers  which  formerly  were  latent.  He 
wished  by  encouraging  manufactures  to  stimulate 
men  with  new  ambitions  to  produce  wealth.  "To 
cherish  and  stimulate  the  activity  of  the  human 
mind,"  he  says,  "by  multiplying  the  objects  of 
enterprise,  is  not  among  the  least  considerable  of 
the  expedients  by  which  the  wealth  of  a  nation 
may  be  promoted.  Even  things  in  themselves  not 
positively  advantageous  sometimes  become  so,  by 
their  tendency  to  provoke  exertion.  Every  new 
scene  which  is  open  to  the  busy  nature  of  man  to 
rouse  and  exert  itself,  is  the  addition  of  a  new 
energy  to  the  general  stock  of  effort. 

"The  spirit  of  enterprise,  useful  and  prolific  as 
it  is,  must  necessarily  be  contracted  or  expanded,  in 
proportion  to  the  simplicity  or  variety  of  the 
occupations  and  productions  which  are  to  be  found 
in  a  society.  It  must  be  less  in  a  nation  of  mere 
cultivators,  than  in  a  nation  of  cultivators  and 
merchants ;  less  in  a  nation  of  cultivators  and  mer- 
chants than  in  a  nation  of  cultivators,  artificers, 
and  merchants."1* 

Hamilton  marks  the  dividing  line  between  mer- 
cantilism and  modern  protection.  The  old  mer- 
cantile fallacies  of  money  and  the  balance  of  trade 
were  like  bubbles  which  need  but  a  pin-prick  to 

a  Hamilton,  MS.     Manufactures,  2,  L.  C. 

b  Works,  vol.  4,  pp.  94,  95.    Manufactures,  1791. 

[147] 


ALEXANDER  HAMILTON 


burst  them,  but  out  of  the  ruins  of  the  old  Hamil- 
ton reconstructed  the  new,  and  thereby  became  the 
founder  and  prophet  of  modern  protection. 
Through  List  his  ideas  have  affected  the  policies 
of  Germany,  through  the  Careys  and  others  they 
have  been  perpetuated  in  America,  and  in  more 
recent  times  they  have  crept  past  the  shades  of 
Smith  and  Cobden  into  free-trade  England.  Ham- 
ilton's theory  of  protection  was  more  than  a 
political  expedient;  it  was  the  economic  side  of  his 
nationalistic  creed.  The  encouragement  of  manu- 
factures, he  knew,  would  strengthen  the  nation  in 
the  rivalries  of  the  world  and,  by  creating  mutual 
wants,  unite  the  sections  together;  but  the  keystone 
of  his  doctrine  was  the  belief  that  the  diversifica- 
tion of  industrial  pursuits  would  increase  the  na- 
tion's power  to  produce  wealth.  It  is  in  contribut- 
ing this  theory  that  he  has  claim  to  a  respectable 
place  among  the  economists  of  the  world. 

If  it  be  admitted  that  it  is  desirable  for  an 
agricultural  country  to  encourage  manufactures 
the  question  presents  itself:  How  shall  this  be 
accomplished?  Hamilton's  list  of  means  is  ex- 
haustive. It  includes:  protecting  duties;  prohibi- 
tion of  rival  articles;  prohibition  of  the  exporta- 
tion of  the  materials  of  manufactures;  the  exemp- 
tion of  materials  of  manufactures  from  duty; 
drawbacks  of  duties  which  are  imposed  on  the 
materials  of  manufactures.  Hamilton  did  not 

[148] 


PROTECTION 


recommend  unqualifiedly  all  these  means.  Of 
prohibition  of  rival  articles  he  said  that  "it  is  only 
fit  to  be  employed  when  a  manufacture  has  made 
such  progress,  and  is  in  so  many  hands,  as  to  insure 
a  due  competition,  and  an  adequate  supply  on 
reasonable  terms. "a  Of  prohibition  of  the  export 
of  raw  material  he  said  that  it  is  a  regulation 
which  "ought  to  be  adopted  with  great  circum- 
spection and  only  in  very  plain  cases. "b 

Hamilton  further  suggested  that  manufactures 
might  be  encouraged  by  improving  transportation 
and  banking  facilities;  by  encouraging  the  dis- 
covery at  home  and  the  introduction  from  abroad 
of  new  inventions;  and  by  the  judicious  regulation 
for  the  inspection  of  manufactured  commodities. 
He  placed  special  emphasis  on  regulation.  "Con- 
tributing," he  says,  "to  prevent  frauds  upon  con- 
sumers at  home  and  exporters  to  foreign  countries, 
to  improve  the  quality  and  preserve  the  character 
of  the  national  manufactures,  it  cannot  fail  to  aid 
the  expeditious  and  advantageous  sale  of  them, 
and  to  serve  as  a  guard  against  successful  compe- 
tition from  other  quarters. "c 

Hamilton  had  a  particular  bias  for  bounties. 

a  Works,  vol.  4,  p.  144.    Manufactures,  1791. 

b  Works,  vol.  4,  p.  145.  Manufactures,  1791.  It  seems  strange 
that  Hamilton  does  not  mention  in  this  connection  that  under  the 
Constitution  neither  State  nor  Nation  can  lay  duties  on  exports. 
Art.  1,  sec.  9,  cl.  5 ;  Art.  1,  sec.  10,  cl.  2. 

c  Works,  vol.  4,  p.  158.    Manufactures,  1791. 

[149] 


ALEXANDER  HAMILTON 


"This,"  he  says,  "has  been  found  one  of  the  most 
efficacious  means  of  encouraging  manufactures, 
and  is,  in  some  views,  the  best."a  He  favored 
them  because  their  effect  was  direct  and  positive; 
because  they  avoided  a  temporary  augmentation 
in  price ;  because  they  had  not,  like  high  protective 
duties,  a  tendency  to  produce  scarcity;  and  because 
by  them  new  objects  in  agriculture  and  manu- 
factures may  be  encouraged  together.  He  also 
favored  premiums  since  their  effect  is  to  stimulate 
general  effort.  "They  are,"  he  says,  "a  very 
economical  means  of  exciting  the  enterprise  of  a 
whole  community."11 

To  those  who  like  Sumnerc  believe  that  in  his 
philosophy  of  trade  Hamilton  never  rose  above 
the  mercantilist's  balance  of  trade  theory  it  must 
suffice  here  to  answer  with  one  quotation.  "It 
seems  not  always  to  be  recollected,"  Hamilton 
says,  "that  nations  who  have  neither  mines  nor 
manufactures  can  only  obtain  the  manufactured 
articles  of  which  they  stand  in  need  by  an  exchange 
of  the  products  of  their  soils;  and  that  if  those 
who  can  best  furnish  them  with  such  articles  are 
unwilling  to  give  a  due  course  to  this  exchange, 
they  must,  of  necessity,  make  every  possible  effort 
to  manufacture  for  themselves;  the  effect  of 

a  Works,  vol.  4,  p.  146.    Manufactures,  1791. 
b  Works,  vol.  4,  p.  153.     Manufactures,  1791. 
c  Sumner,  W.  G.,  Alexander  Hamilton,  p.  175. 

[150] 


PROTECTION 


which  is,  that  the  manufacturing  nations  abridge 
the  natural  advantages  of  their  situation,  through 
an  unwillingness  to  permit  the  agricultural 
countries  to  enjoy  the  advantages  of  theirs,  and 
sacrifice  the  interests  of  a  mutually  beneficial  inter- 
course to  the  vain  project  of  selling  everything 
and  buying  nothing."*  The  assumption  of  some 
free-traders  that,  if  one  industry  declines,  under 
competition  from  without,  the  existing  capital  and 
labor  inevitably  finds  employment  in  other  in- 
dustries, would  seem  to  imply  that  the  economic 
decay  of  a  nation  is  not  possible, — an  implication 
scarcely  supported  by  the  facts  of  history.  Ham- 
ilton, while  understanding  the  laws  which  operate 
on  the  wealth  existing  in  a  society  in  a  point  of 
time,  was  more  interested  in  the  causes  which 
stimulate  the  production  of  wealth  and  the  forces 
which  cause  nations  to  rise  and  decline. 

It  may  be  best  from  the  point  of  view  of  hu- 
manity to  have  weak  and  declining  nations  elim- 
inated; but  to  the  nationalist  the  collective 
interests  of  a  group  of  people,  with  common  life 
and  civilization,  is  worth  preserving.  Hamilton 
was  little  concerned  with  how  we  might  exchange 
our  existing  wealth  for  goods  in  Europe;  he  was 
deeply  concerned,  however,  with  how  every  force, 
physical  and  mental,  within  the  nation  might  be 
turned  to  increasing  our  productiveness.  "The 

a  Works,  vol.  4,  p.  96.    Manufactures,  1791. 
[151] 


ALEXANDER  HAMILTON 


support  of  industry,"  he  says,  "is,  probably  in 
every  case,  of  more  consequence  towards  correct- 
ing a  wrong  balance  of  trade  than  any  practicable 
retrenchments  in  the  expenses  of  families  or  indi- 
viduals."* To  him  the  course  of  the  exchanges 
was  merely  a  barometer  of  national  prosperity. 
We  might  for  a  time  satisfy  an  adverse  trade 
balance  by  exporting  our  securities  but,  if  we  were 
to  remain  a  solvent  nation,  these  sooner  or  later 
had  to  be  met  by  the  exportation  of  actual  wealth. 
A  nation  which  imported  more  goods  and  services 
than  it  exported  must  sooner  or  later,  Hamilton 
maintained,  either  abridge  its  imports,  increase  its 
exports,  or  diversify  its  industry.  And  it  was 
in  seeking  to  strengthen  the  American  nation  by 
giving  it  a  more  complex  life  that  he  found  justifi- 
cation for  meddling  with  the  sacred  and  natural 
laws  of  exchange. 

We  will  do  well  to  remember  that  protection, 
as  Hamilton  understood  it,  was  an  expression  of 
nationalism.  The  charge  of  the  Socialist  that 
protection  is  grounded  on  capitalism  and  that  it  is 
a  device  by  which  the  capitalist  exploits  the 
worker,b  may  be  valid  against  some  modern  legis- 
lative policies  which  seek  to  justify  themselves  by 
invoking  the  name  of  Hamilton.  But  the  mis- 
application of  protection  cannot  be  laid  at  the  door 

a  Works,  vol.  3,  p.  407.     National  Bank,  1790. 

b  Rabbeno,  IL,  Protezionismo  Americano,  Essay  2,  ch.  2,  sec.  17. 

[152] 


PROTECTION 


of  Hamilton.  Protection  which  now  allows  capi- 
talists to  use  the  strength  of  the  nation  to  main- 
tain their  system  of  exploitation  is  not  even  akin  to 
Hantiltonian  protection.  To  him  protection  was 
a  means  of  strengthening  a  weak  class,  not  for 
the  benefit  of  that  class,  but  for  the  power  and 
wealth  of  the  nation.  Class  interests  in  which  the 
Socialist  believes  and  self-interest  in  which  the 
free-trader  has  such  implicit  faith  were  to  him 
forces  to  be  either  encouraged  or  restrained  as 
the  interests  of  the  whole  people  demanded. 


[153] 


THE  UNIVERSITY  LIBRARY 
UNIVERSITY  OF  CALIFORNIA,  SANTA  CRUZ 


This  book  is  due  on  the  last  DATE  stamped  below. 


JUN  1 1  1969 


21 


APR  4 


KG"  5     1978  REfi'D 


100m-8,'65(F6282s8)2373 


